Is Supermicro Great AI Stock or Just Junk that exploded with AI hype?

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Super Micro had that classic situation where it decided to go up and then decided to switch it up and head downward. So is this just another Katy Perry song where we really don’t know if they are hot or cold one day or the other, or are we able to make a strategic analysis to see if they are worth the time and crucial brain space to even think about? Well, let’s find out.

First, let’s check out some of their financials that have led many people to worry about not just their future performance but also their growth potential and whether there will be a plateau mark in the margins for the time being. This is because while Supermicro has had significant earnings growth in the past fiscal year with striking numbers within many of the key metrics, many wonder about the sustainability of some of those crazy margins they’ve had, especially with some of their most recent moves such as price cuts. These worries about a potential decrease in their margins during their August earnings report were also exacerbated by the fact that there were some questionable accounting practices potentially going on behind the scenes. This also came along with the fact that a month later they ran into troubles with the Nasdaq that said it wasn’t in compliance with timely reporting to the SEC policy. So, generally, it seemed like they were getting whacked in all directions that didn’t help their stock increase these past couple of months and mainly consisted of red days and spurts of large green jumps like what we saw on Monday, October 7th.

So where does this leave us? Because it seems like they have been hit with a lot of questionable behavior stuff back-to-back-to-back. Well, the fact of the matter is a lot of people are worried that the earnings on October 29th will exemplify a lot of potential ruins Supermicro could get hit with after their quick and high run to the top and most recent slide. But from our point of view, it seems like with such a high short interest at 18% (and for some comparison, Microsoft only has a .81% short interest) combined with the fact that they have some large high-paying partners, and no real known loss of business makes them seem like a potential play against what a lot of the big banks are saying and some of the big news outlets. A PE ratio of 23.39 as a “Tech company” that offers data warehouse and AI solutions is really appealing after getting beat up. They’ve dropped nearly 50% over the past month but are somehow still up 62% YTD which is crazy. So, proceed with caution but this could either be an opportunity to hop back on the bus heading into this earnings season or take a step back and see some of the glaring problems they have, but all in all that is up for you to decide in this part of the story and continue on this journey.