Middle East Deals Could Lift Super Micro Computer Stock. How Should You Play SMCI Here?
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Supermicro (SMCI) shares remain in an uptrend as investors continue to cheer the AI server giant’s $20 billion deal with a Saudi-based data center firm – DataVolt.
SMCI proponents believe this multi-year agreement will deliver a material boost to the company’s revenue at a time when it’s reportedly grappling with a slowdown.
That said, it may be smart to still opt for a cautious stance on Super Micro Computer this year as much of the good news may already be baked into the AI stock at current levels.
Mizuho’s Take on Supermicro Stock at Current Levels
According to Vijay Rakesh, a senior Mizuho analyst, “tailwinds” from President Donald Trump’s recent tour of the Gulf states warrant raising the price target on SMCI shares.
However, his upwardly revised price target of $40 still indicates potential downside of over 10% from current levels, suggesting Rakesh also sees the good news as priced in already for the most part.
The AI stock is currently down some 32% versus its year-to-date high at the time of writing.
SMCI Shares Remain a Risky Investment for 2025
Supermicro has eliminated several overhangs since the start of this year – biggest one being the risk of it getting delisted from Nasdaq Exchange.
But investors should remain wary of building an aggressive position in Supermicro stock at current levels as its gross profit margin, unlike the majority of other AI stocks, is contracting instead of expanding in 2025.
In its latest reported quarter, the AI server company saw its revenue increase by 19% on a year-on-year basis. However, it also saw a 26% hit to its gross profit that printed at $440 million only.
All in all, investors have better avenues to invest in artificial intelligence servers than SMCI stock this year. These include the famed investor Jim Cramer’s favorite Dell Technologies (DELL).
What’s the Mean Target on Super Micro Computer?
Other Wall Street analysts also agree that the recent rally in Supermicro stock has priced in the positives already.
While the consensus rating on SMCI shares remains at “Moderate Buy,” the mean target of about $44 is lower than its current trading price.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.