Loop Capital Predicts Super Micro Computer (SMCI) May Face Challenges in 1HCY2025 Until Key Tier 2 Customers Receive GB200 Allocation in May/June

Loop Capital Predicts Super Micro Computer (SMCI) May Face Challenges in 1HCY2025 Until Key Tier 2 Customers Receive GB200 Allocation in May/June

This article does not constitute investment advice. The author does not hold any positions in the stocks mentioned herein.

The Current Landscape for Super Micro Computer (SMCI)

Super Micro Computer (SMCI), a prominent player in the global server and AI rack market, has experienced moderate stock price increases in line with the broader market’s performance since the beginning of the year. Nevertheless, a Wall Street analyst has issued a cautionary note for SMCI investors, suggesting they prepare for potential volatility through May or June.

Analyst Insights on Super Micro Computer’s Future

Ananda Baruah, an analyst at Loop Capital, emphasized Super Micro Computer’s importance in its sector and acknowledged the various challenges it faces. These include ongoing SEC filing issues and public controversies that have marred its reputation, particularly the recent departure of its well-regarded auditing firm. Additionally, the February 25 deadline to submit overdue financial statements looms large, with potential consequences including delisting from the Nasdaq stock exchange.

Despite these hurdles, Baruah remains optimistic, noting that the company’s two largest clients have ambitious plans for 2025, which he believes will ultimately benefit SMCI. He articulated this perspective clearly:

“That said, we anticipate SMCI could experience a clunky 1HCY2025, at least until May/June when key Tier 2 customers begin getting GB200 allocation.”

Revised Stock Price Target and Market Position

In light of these conditions, Baruah has adjusted his price target for SMCI from $35 to $40, acknowledging that the journey to this target is unlikely to be linear due to the “Blackwell ramp and Tier 2 purchasing patterns.”His insights underscore the importance of ongoing developments in the company’s operations and market demands.

Innovations and Future Capacity Enhancements

Recent evaluations by Lynx Equity have demonstrated that SMCI is leading the way in liquid-cooled server technology compared to its competitors, facilitating the quick deployment of high-performance servers in compact configurations. Currently, Super Micro has an output capacity of 5,000 server racks monthly, which includes 2,000 liquid-cooled systems. Furthermore, the company plans to enhance production capabilities through the expansion of its facility in Malaysia, intending to double its capacity to 10,000 server cabinets per month.

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