Super Micro Computer stock has been on a meteoric rise, gaining an astounding 214% this year. The driving force behind this surge is the excitement generated by the growth potential of its high-end AI servers, which are known for their inclusion of Nvidia GPUs. However, some analysts, like Wells Fargo's Aaron Rakers, believe that this surge may be too much and that the stock is already overvalued. Rakers recently initiated coverage on the shares and designated them as Equal Weight, with a price target of $960.
One of Rakers' concerns is that the current valuation of Super Micro stock implies an expectation for the company to generate over $30 billion in annual revenue in the upcoming years. This estimate is more than double the current Wall Street projection for this fiscal year. Additionally, he remains cautious about the increased competition in the AI server market from traditional vendors.
In late January, Super Micro reported superb quarterly results and raised its fiscal 2024 revenue forecast to a range of $14.3 billion to $14.7 billion, well above its prior forecast of $10 billion to $11 billion.
Following this impressive earnings report, our publication suggested that shareholders might consider capitalizing on Super Micro's success by selling off their shares at around the $800 level.
It is important to remember that even the hottest AI stock does not grow indefinitely. This recent dip in Super Micro stock serves as a reminder that valuations ultimately matter. While the long-term prospects for the company remain promising, it is vital for investors to closely monitor any signs of tempering GPU-based server demand.
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