Super Micro Stock Falls Before Earnings After Elon Musk Made a Big AI Announcement. What Did He Say?
Complete. Here is the key summarySuper Micro Computer (SMCI) stock fell 3.1% to $29.38 following Elon Musk's announcement that SpaceX and xAI will exclusively use Nvidia chips for AI infrastructure, raising concerns about demand for rival hardware. Despite profit-taking and valuation worries, SMCI reports strong fiscal Q4 expectations with earnings per share projected at $0.68 and sales at $11 billion. Analysts maintain a consensus 'Hold' rating with an average price target of $38.40.
Super Micro Computer stock (SMCI) fell 3.1% to $29.38 on Thursday following comments made by Elon Musk earlier in the week. During SpaceX's (SPCX) earnings call late Tuesday, August 4, Musk announced that his companies, including SpaceX and xAI, would build their AI infrastructure exclusively on Nvidia (NVDA) chips going forward.
As a result, his statement created a lot of concern across the market regarding demand for other tech hardware providers. While Nvidia shares rose on the news, rival chip and server makers took a hit as investors feared a shift away from non-Nvidia suppliers. Investors became worried that server and hardware partners could lose key orders. This caused trade volume in SMCI stock to hit 26.3 million shares.
"Going forward, we have decided to build exclusively on Nvidia, because we think the Vera Rubin architecture is the best architecture," stated Elon Musk during the SpaceX call.
SMCI Could Be Overpriced
Outside of the comments from Elon Musk, regular trading pressure added to Thursday's drop. After SMCI stock surged in prior weeks, many buyers decided to cash out their short-term profits.
At the same time, traders worry SMCI could be overpriced. The core problem is that the stock price may already reflect all the company's expected growth for the next few quarters. When the market already prices in all the expected growth ahead of time, the stock struggles to climb much higher, even when actual sales results look good.
That is why several Wall Street banks prefer to wait on the sidelines. Mizuho analyst Vijay Rakesh, rated 5-star, recently dropped his price target to $34 from $44. Citigroup analyst Asiya Merchant, also rated 5-star, set her target at $33. Across the board, analysts hold a consensus "Hold" rating with an average price target of $38.40.
SMCI's Sales Orders Support Upcoming Earnings Growth
Despite the recent price fall, Super Micro Computer reports its Fiscal fourth-quarter results on Tuesday, August 11. Wall Street expects the company to report earnings of $0.68 per share, which marks a 65.9% jump compared to last year.
In addition, quarterly sales estimates sit at $11 billion, representing a 91% increase from the prior year. A record backlog of server orders and solid results from partner Western Digital (WDC) show that data center demand remains high. Consequently, the August 11 earnings release will test whether real profits can help SMCI stock recover from its recent drop.
Is SMCI a Good Buy Right Now?
On TipRanks, Super Micro Computer's stock (SMCI) has a Hold consensus, based on 12 analysts issuing ratings in the past three months. This is based on three Buys, eight Holds, and one Sell rating. The average 12-month SMCI stock price target is $38.40, implying about 30.7% upside potential from the current price levels. (See SMCI stock forecast)