The Stock of Super Micro is on Track for Its Longest Winning Streak in Months, Despite a Number of Unknowns

Super Micro Computer Inc. is experiencing its longest winning streak in about six months, with shares rising for four consecutive sessions ahead of a scheduled "business update" on Tuesday. If the stock closes in positive territory on Monday, it would mark its longest streak since a five-session rally that ended on August 16, 2024, according to Dow Jones Market Data. However, despite the recent momentum, an analyst has cautioned that the company still faces several uncertainties.

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Wedbush Securities analyst Matthew Bryson expressed concerns about the risks surrounding Super Micro’s AI server business and its financial reporting challenges. In a note to clients on Monday, he reiterated a neutral rating on the stock, citing "substantial unknowns" ahead of the company’s upcoming earnings call. He pointed out that key questions remain, particularly regarding the company’s delayed financial filings, whether it can meet Wall Street’s revenue expectations, and whether its margins will stabilize.

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Super Micro has until February 25 to submit its overdue annual report for fiscal 2024, which ended in June, along with its quarterly report for September. The company previously sought an extension from Nasdaq after missing filing deadlines, submitting a compliance plan in November to regain regulatory approval. Failure to meet the deadline could result in potential delisting from the Nasdaq.

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Adding to the concerns, Bryson noted increasing competition in the AI server market. Super Micro was among the first companies to capitalize on this sector, and its stock surged in 2023 and 2024, making it one of the top AI-related hardware stocks alongside Nvidia Corp..

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However, the company has faced significant stock declines over the past year. Its shares have lost about 50% of their value, largely due to uncertainties surrounding its financial filings and the abrupt resignation of its former auditor, EY. When that news broke in October, shares plummeted 33% in a single day. Super Micro has since engaged a new auditor and stated that it does not expect to restate its financial reports.

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Despite these reassurances, Bryson emphasized that risks remain until the company officially completes its filings. He cautioned that investors should not overlook the possibility that Super Micro could fail to meet Nasdaq’s compliance requirements.

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To address investor concerns, the company announced last week that it would provide an update on its fiscal second quarter of 2025, scheduling a conference call with Wall Street analysts. Super Micro's website has already listed its second-quarter results under its "upcoming events" section.

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Additionally, Super Micro recently announced full-scale production availability for servers utilizing Nvidia’s latest Blackwell chip platform. Following this news, its stock jumped 8% last Wednesday. While this suggests strong demand for the company’s AI servers, Wedbush remains cautious about the competitive landscape and pricing pressures.

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Bryson pointed out that Super Micro’s gross profit margins are already slim, and the increasing dominance of Nvidia and other semiconductor vendors in system design could further squeeze profitability. He warned that AI servers are increasingly becoming commoditized, which could put further downward pressure on gross margins.

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Another challenge came to light with a Bloomberg report revealing that Hewlett Packard Enterprise Co. (HPE) recently secured a $1 billion contract to supply AI servers for xAI, Elon Musk’s artificial intelligence startup. Super Micro and Dell Technologies Inc. were reportedly in the running for the deal but ultimately lost out to HPE.

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While Super Micro’s stock has regained some ground recently, uncertainty remains regarding its financials, competitive positioning, and ability to maintain profitability in the fast-evolving AI server market. Investors will likely watch closely for any major developments in the company’s Tuesday update.

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