Super Micro Computer Stock Forecast: SMCI slides 22%, and no one is quite sure why


  • Super Micro Computer slammed after announced earnings date.
  • SMCI stock is down more than 22% on Friday.
  • NVDA, ARM and AMD have also heavily sold off.
  • Traders may be concerned there was no positive pre-announcement.


 

Super Micro Computer (SMCI) stock has plunged over 22% to $723.50 late in Friday’s session. The semiconductor and server software company is experiencing its worst session since August 9, 2023, when it lost more than 23%.

The interesting part is that no one is certain why SMCI stock is down so hard. The NASDAQ has crumbled 2.3% on Friday, alongside the S&P 500, off 1%. The Dow Jones, however, has added about 0.4% at the time of writing.

Super Micro Computer stock news

There have been no corporate filings from the San Jose-based company since April 10, so Friday’s sell-off cannot be blamed on a material event. The plunging stock price first surfaced during Friday’s premarket soon after the company announced that it would be releasing third quarter fiscal 2024 results on Tuesday, April 30.

The sell-off started off small but has continued gaining momentum throughout the session. About 15 million shares have exchanged hands at the time of writing, which is well above the average volume of 10 million.

The only theory that seems to hold weight is that the market is worried for the results since officials didn’t pre-announce results this time around. Back in January, the company raised guidance 11 days prior to its earnings call.

Eleven days out from the next earnings release, the theory goes that no pre-announcement must mean the results will be bad. 

 

 

Some are even saying across social media that the artificial intelligence (AI) bubble that has benefited SMCI stock is now popping. That may be the case since the bloodshed is not sequestered to SMCI. Nvidia (NVDA) stock has given up more than 8% on Friday, and Arm Holdings (ARM) is down about 14%. Advanced Micro Devices (AMD) has shed more than 5%.

Just earlier this week, Loop Capital gave SMCI a $1,500 price target. For the upcoming earnings call, analysts expect $5.76 in adjusted earnings per share (EPS) on $3.94 billion in revenue.

AI stocks FAQs

First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.

There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.

Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.

Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.

SMCI stock forecast

SMCI stock has broken through the lower bound of the Bollinger Bands on Friday. This hard breakout heading into the close tells us that directionally Super Micro Computer is unlikely to reverse course anytime soon. 

I wouldn't expect anyone to sell here, but entries should be expected somewhere lower. The $686 to $709 support window on the daily chart below gives us one idea for timing an entry. This range was used as both support and resistance on a number of occasions during February.

With the Relative Strength Index (RSI) now at 33, bulls will wait for the RSI to descend below the 30 oversold level and time their entry for when the RSI closes back above that 30 level. 

SMCI daily stock chart

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