Super Micro Computer Analysis: It's only March 6 and SMCI is already up 300% this year

• Super Micro Computer shares rise again on Wednesday.
• SMCI is scheduled to enter the S&P 500 on March 18.
• SMCI stock has risen more than 1,000% in the last year.
• Argus gives SMCI a price target of $1,350.

The stock rally Super Micro Computer (SMCI) can't stop. Despite having possibly the dumbest name in all of technology, Super Micro Computer is already up more than 300% so far in 2024, as Wall Street is full of praise for the San Jose-based company.

The main reason investors have flocked to SMCI stock recently is that the company is about to join the S&P 500, forcing the world's largest index funds to own shares of Super Micro Computer. The company will replace Whirlpool (WHR) in the index.

SMCI shares are up more than 5% at the start of Wednesday's trading session, while the S&P 500 gains 0.5%.

News about Super Micro Computer

As a creator of specialized servers for artificial intelligence (AI) use cases, Super Micro Computer has a market capitalization of $60 billion, about four times the valuation needed to be included in the S&P 500. The company has not been included before. , because it has only recently reached such a rating.

SMCI shares have risen more than 1,000% in the last year as its profits continue to rise. The company has increased its adjusted EPS by more than 500% in the last two years. It's even better than Nvidia (NVDA), the leading AI stock, which has gained 265% in that time. Like Nvidia, Super Micro Computer is a pick and shovel game.

Companies looking to develop new applications in the field of AI need Nvidia GPUs to do their work. Super Micro Computer then creates servers and storage products specially designed for GPU-centric architectures, as well as software to manage them. Curiously, both companies were founded in California in the same year: 1993.

With the artificial intelligence sector set to see massive growth in the coming years, Wall Street expects Super Micro Computer to benefit greatly.

“SMCI is very well positioned to meet demand for artificial intelligence in the coming years,” Goldman Sachs analysts wrote this week in a research note. However, the team said that Cisco (CSCO) and Dell (DELL) are expected to become more competitive after several years, which should slow Super Micro Computer's skyrocketing growth.

Goldman Sachs gives SMCI stock a Neutral rating, given that it has already garnered a heady forward valuation. Argus, for its part, this week placed WallStreet's highest price target for SMCI at $1,350.

“In our view, Super Micro is a leading provider of computers and servers for the era of generative AI,” wrote Jim Kelleher, chief analyst at Argus, “although SMCI stock is not cheap, we believe the growth prospects for “The short and long term justify the investment in them at current levels.”

Forecast on Super Micro Computer

SMCI stock bounced off the 61.8% Fibonacci extension on the daily chart. This Fibonacci level sits just below $1,170. A break above this level would allow the bulls to push towards the 78.6% Fiboancci, which sits just below $1,300.

SMCI is already overbought on the Relative Strength Index (RSI), but it is not worrying. The RSI stood at 72 on Wednesday.

Bulls should only worry if SMCI price moves below the previous range high from February 16 near $1,078. The 20-day SMA should hold if SMCI sees a pullback. The 20-day SMA is close to the 23.6% Fiboancci at $875, offering it a fuller share of respect from the investing community.

SMCI Daily Chart