Super Micro Computer emerged as an investor darling early this year, as Wall Street unearthed the stock, driving it higher with gains that rivalled even Nvidia's. The firm, which makes artificial intelligence systems and graphics processing unit servers, was the hot new AI play. Its fortunes are tied to Nvidia's, with which it has a partnership. Super Micro's shares soared all the way up to a year-high in mid-March, but they have been volatile since then — diving in late April and selling off again in early May. After Nvidia reported blockbuster earnings last Wednesday, Super Micro's shares were rocky again. According to FactSet data, they initially soared to a day-high of $972.31 during Thursday's trading but dropped by the close to $847.38 — a roughly 3% decline from the day before. But the shares bounced back Friday to close at $883.88 — a 4.3% gain. Year-to-date, however, the stock is still up an astounding 210% or so. Where do the shares go from here? Here's what analysts from Wall Street say. Where SMCI is headed BofA said in a May 23 note that the "biggest takeaway" from Nvidia's earnings was that demand for AI-related accelerated computing "remains strong," and is expanding beyond cloud service companies to consumer Internet companies and enterprise AI. "In our opinion, Supermicro stands to benefit from this growing demand," the bank said. It explained that the firm is "well positioned" with "tier 2" cloud service companies such as CoreWeave which are "seeing strong demand" and are expanding globally. CoreWeave is one of Super Micro's customers. BofA added that SuperMicro has "pockets of strength" in enterprise in areas such as financial services, drug discovery and autonomous vehicles. "[It] is in early discussions with sovereign entities who are looking for a partner who can customize their AI setup to maximize performance from the hardware, while providing attractive price/performance," the bank's analysts wrote. The prominence of data centers in the AI boom is another tailwind for Super Micro, BofA noted, given the cooling needs of such centers. "Only 1% of datacenters today use liquid cooling, but Supermicro management expects that percentage to grow to 20% in the next 12-18 months," BofA noted. "We see Supermicro as having a competitive advantage in providing liquid cooling at scale." BofA reiterated its buy rating on Super Micro, giving it a price target of $1,090, or potential upside of about 23%. Paul Meeks, co-chief investment officer at Harvest Portfolio Management, said that he would not buy more right now, but if Super Micro were to fall back to a share price of between $700 and $750, he would buy more. Meeks, who had bought the firm's shares a year or two ago, said he still likes the stock despite its sputtering rally, noting that it still has more than tripled year-to-date. "I don't know if I'd buy more here because the stock has lost its momentum, but I'd continue to hold it," he told CNBC Pro. "Of course, SMCI is a backdoor NVDA play although I own NVDA in even bigger size than SMCI. As you know, NVDA's [quarterly numbers and] guidance even stunned the bulls on that company/stock. SMCI is now trading @ just 25X next year's earnings for 40%+ earnings growth," he said via email. In a May 20 note, JPMorgan said it has an overweight rating on Super Micro. "Super Micro believes the industry is still in very early stages of the the investment cycle/ infrastructure upgrade cycle relative to AI, with investments starting to pick up in regions beyond United States, including in some cases investments by foreign sovereigns," JPMorgan analysts wrote. Other takeaways that JPMorgan gathered in a recent chat with SuperMicro's chief financial officer is that SuperMicro is working with partners beyond Nvidia that leads to price increases for products. "Super Micro highlighted that they work with various partners beyond Nvidia that offer new technologies relative to compute, like Intel and AMD, and have a strong pipeline of products with each, and continue to have a strong (and record) backlog," JPMorgan analysts wrote. "Each new technology upgrade for servers drives upside across both pricing and volumes," they added. Analysts covering the stock still give it a consensus price target of $1,059.03, with an average potential upside of 19.8%, according to FactSet. — CNBC's Michael Bloom contributed to this report.
