AI stock is about to issue an upside preannouncement, Wells Fargo says

Super Micro Computer could issue a positive announcement ahead of its early August earnings for its fiscal fourth quarter, potentially giving investors good news to look forward to afte r the server company’s third-quarter revenue miss , Wells Fargo believes. Super Micro has, on average, either preannounced or published its earnings release date on the 19th day after the close of its quarterly results, with the range of between 18 to 24 days, according to analysts led by Aaron Rakers. That leaves Wells Fargo optimistic about a possible update from the company late next week, particularly given improved sentiment and valuation behind the stock. “With indications of some large scale GPU cluster deployments (e.g., xAI’s supercomputer, Meta, Tesla, etc.) and an increasingly visible emphasis on volume deployments of the company’s direct-liquid cooling/DLC rack-scale offerings, we see investor sentiment as being reflective of an upside pre-announcement,” Rakers said in an eight-page note on Wednesday. Rakers maintained his equal weight rating and $890 target price ahead of Super Micro’s quarterly results, which FactSet says are due August 6. Wells’ target is right around where Super Micro closed Tuesday, at $895.61. But under the most optimistic, upside scenario, Wells targets the stock at $1,200, suggesting 34% upside. This year, Super Micro has more than tripled, climbing 215%, as analysts have touted the company as a back door play on artificial intelligence. Super Micro makes artificial intelligence systems and graphics processing unit servers, and its decades-old partnership with AI specialist Nvidia allows it to provide servers that are based on Nvidia’s GPU systems. Ahead of its upcoming earnings release, Rakers is confident that Super Micro can return to gross margins above 14% amid a more intense competitive landscape. Wells Fargo cites Nvidia’s Blackwell product cycle, which includes GB200 Grace-Blackwell Superchips in late 2024, saying its customer base is significantly more diverse compared to Nvidia’s Hopper GPU architecture. Super Micro is likely to emphasize its direct-liquid cooling expansion and highlight its wider inventory, as well as provide updates on capital spending and the possible need to raise additional capital by selling stock or debt, Wells Fargo said “We are positive on SuperMicro’s ability to continue to be a meaningful player in the ongoing AI server investment cycle,” Rakers said, warning, however, that “we remain cautious on increased competition in the AI server market from traditional vendors and [original design manufacturers] as well as from SMCI concentration risk in AI shipments with ~5-7% of unit shipments accounting for ~60% of revenue.” SMCI YTD mountain Super Micro shares in 2024.