Super Micro Computer (NASDAQ:SMCI) has proven a major winner among tech stocks, to the point where the chair was recently pulled out for it to join the S&P 500 (SPX). That sent shares on an upward tear. However, the rally didn’t last. Indeed, Super Micro is down over 4% in Tuesday afternoon’s trading as the shine is wearing off its move to the S&P 500.
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The move to the S&P 500 was huge for Super Micro, sending it up over 18% in Monday’s trading. But now, that’s retracting, as some profit-taking is likely in play. Super Micro had already been rapidly gaining throughout 2024 and even back in 2022. Shares were up 246% in 2023 and up 87% in 2022. That was no small feat; 2022 was a terrible year for tech stocks and was actually the worst on a broad scale since 2008. Super Micro’s focus on artificial intelligence (AI) has certainly proven helpful here as well; the AI arms race is proving a gold rush for the firms involved in providing its infrastructure.
Drawing Competition
The problem for Super Micro might be an excess of success. Nothing draws the attention of competitors like being a successful company not surrounded by others. That gives the impression that it’s a fairly open market, and competitors have already taken aim at getting their piece. Indeed, Jim Cramer, a notorious analyst with CNBC, offered up a list of stocks that he “liked better” than Super Micro, including, among others, Dell (NYSE:DELL). Beyond that, continuing troubles in the Chinese market are likely to plague Super Micro as it becomes ever more difficult to sell chips into China and not run afoul of U.S. regulators.
Is SMCI a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SMCI stock based on five Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 948.41% rally in its share price over the past year, the average SMCI price target of $824.11 per share implies 19.74% downside risk.
