Super Micro Computer Inc. (NASDAQ: SMCI) saw its stock drop by 20% today following its Q4 earnings report.
Despite announcing a better-than-expected forecast and a forthcoming 10-for-1 stock split effective October 1st, the market reaction was overwhelmingly negative.
Delay in Nvidia’s Balckwell GPUs
On the company’s earnings call, CEO Charles Liang mentioned that he did not expect any meaningful shipment of the Nvidia Blackwell GPUs until the start of the second quarter of 2025.
For Q4, I mean December quarter, I guess, it will be very small. Engineering sample small volume. So the real volume, I believe, had to be March quarter next year. And that’s why we foresee only $26 billion to $30 billion.
Charles Liang
Companies like Microsoft and Google have already confirmed the delays in their earnings reports. So even when Nvidia CEO is claiming many of the shipments will be handled by the end of this year, the customers are possibly giving a truer picture.
When companies discover a design flaw so late in the manufacturing process like Nvidia did, it usually isn’t good news.
Semiconductor manufacturing is a complicated process and Nvidia and Taiwan Semiconductor will have a lot of work to do to fix the flaws. However, considering Nvidia doesn’t have any great competition, a few months’ delay doesn’t affect the company.
It does, however, affect a company like Super Micro Computer, which has given conservative guidance as it doesn’t see much impact of the Blackwell GPUs on its liquid cooling racks sales until the last quarter of FY2025, which ends in June 2025.
Having said that, the forecasted revenue is already factoring in an 87% YoY growth, which is impressive. What’s even more impressive is that this is on top of the 110% revenue growth in FY2024.
What are the analysts saying?
The stock received a downgrade from BofA who assigned it a rating of Neutral from the previous Buy rating. The analysts at the firm expect the company’s margins to stay depressed despite the expectation of strong revenues.
However, the fact that analysts agree with the company’s forecast of increasing revenues shows that the AI industry is still expected to remain strong. This could bode well for stocks that cater to AI infrastructure.
Wells Fargo maintained an equal weight rating with a price target of $650. The firm believes that the increase in revenue offsets the reduction in margins, bringing neither any overall benefit nor causing any great concern.
J.P. Morgan’s team of analysts led by Samik Chatterjee maintained their overweight rating and the price target of $950. They believe the company’s lackluster margins were already priced in.
The stock was last trading at $492, which comes out as a 48% discount to J.P. Morgan’s price target.
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