Super Micro Computer Positioned for Growth with Key AI Partnership

Super Micro Computer (NASDAQ: SMCI) is poised for a significant rebound following a challenging year. With accounting issues resolved, the outlook is now increasingly optimistic. A major driver of this positive sentiment is the recent opening of Saudi Arabian AI markets.

Recent policy changes from President Donald Trump have facilitated billions in AI infrastructure investment in Saudi Arabia. This venture will likely involve substantial orders of NVIDIA and AMD GPU semiconductors over the next five years, translating into substantial demand for Super Micro’s servers and related systems.

Major $20 Billion Partnership Enhances Revenue Projections

Among noteworthy announcements in Riyadh, Super Micro formed a partnership with DataVolt, which includes a $20 billion deal. This partnership will expedite the deployment of Super Micro’s ultra-dense GPU servers and rack systems.

The collaboration is expected to unfold over the next five years as Saudi Arabia invests in its datacenter infrastructure. Analysts project this deal will contribute nearly 100% revenue growth relative to the consensus for 2025.

Analyst Sentiment and Market Trends

The landscape for Super Micro is evolving, evidenced by increasing analyst coverage over the past 18 months. Ratings have shifted toward a Moderate Buy sentiment, although price targets have seen a decline.

Recently, Raymond James initiated an Outperform rating, noting that Super Micro is a pure play in the AI space, positioning the company well for market share growth across branded and wholesale sectors.

With institutional ownership at roughly 85% and ongoing purchases, the stage is set for a potential short-covering rally, especially given the current short interest of 22%—a level near record highs.

Super Micro Computer: A Potentially Deep Value Opportunity

Super Micro’s revenue and earnings growth outlook appeared strong even before the Saudi deals were announced. As of mid-May, the stock traded at merely 9 times its 2028 earnings forecasts, which are now likely understated. Analysts foresee a more fitting valuation closer to 30 times earnings, suggesting a potential 200% upside in the coming quarters.

The critical resistance level for the stock is around $56.50, which may be reached before the end of the first half of 2025 and potentially ahead of the Q4 FY2024 earnings release.

The introduction of new AI-optimized servers is likely to further accelerate the company’s growth, with expectations of surpassing current consensus forecasts.

Risks and Market Considerations

However, investors should remain mindful of the potential for a market overhang in 2025. This could stem from a large block of shares released by earlier buyers who are now at a loss from early 2024 purchases.

Should SMCI cross above $56.50, the next critical resistance targets are $68 and $98. Yet, a bearish reversal could be anticipated within this range, particularly if any further accounting issues surface.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.