-
Supermicro’s stock has dropped about 60% from its all-time high.
-
Its revenue growth is slowing down, and its gross margins are declining.
-
But if it stabilizes its business, it looks undervalued relative to its growth potential.
Super Micro Computer (NASDAQ: SMCI), more commonly known as Supermicro, went on a wild ride over the past year. The maker of artificial intelligence (AI) servers closed at a record split-adjusted high of $118.81 on March 13, 2024, which marked a 1,020% gain over the previous 12 months.
At the time, investors were impressed by its brisk sales of liquid-cooled AI servers, which ran on Nvidia‘s high-end data center graphics processing units (GPUs). But today, Supermicro trades at about $47.
Supermicro lost its luster as it struggled with a delayed 10-K filing due to accounting issues, the departure of its auditor, delisting threats, and regulatory probes. Its slowing growth and declining gross margins also indicated it was losing its pricing power against its larger competitors.
The company finally hired a new auditor, filed its overdue 10-K this February, dodged a delisting, and seemed to placate the regulators. But its growth is still cooling off as the macro and competitive headwinds intensify across the evolving AI market. So should investors still buy its stock today?
Supermicro is still an underdog in traditional servers compared to market leaders like Hewlett Packard Enterprise and Dell Technologies. But it carved out a niche with its dedicated AI servers, and Raymond James estimates it now controls about 9% of that growing market. Its close relationship with Nvidia also gave it access to a steady supply of top-tier data center GPUs.
Supermicro’s revenue surged 46% in its fiscal 2022 (which ended in June 2022), 37% in fiscal 2023, and 110% in fiscal 2024. Its gross margin expanded from 15.4% in fiscal 2022 to 18% in fiscal 2023 as the AI market heated up.
But its gross margin declined to 14.1% in fiscal 2024 as it faced tougher competition and relied on aggressive pricing strategies to sell more servers. Over the past year, its revenue growth continued to cool off as its gross margins shrank.
|
Metric |
Q3 2024 |
Q4 2024 |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|---|---|
|
Revenue growth (YOY) |
201% |
144% |
180% |
55% |
19% |
|
Gross margin |
15.5% |
11.2% |
13.1% |
11.8% |
9.6% |
Data source: Supermicro. YOY = year-over-year.
Many of its customers postponed their new AI server purchases in anticipation of Nvidia’s next-gen Blackwell chips, while supply chain constraints made it harder to fulfill its existing orders. The macro headwinds exacerbated that pressure by forcing many companies to rein in their spending on pricey AI servers. As a result, its inventory levels rose, its pricing power waned, and its gross margins contracted.
