Super micro computer (NASDAQ: SMCI) stocks posted big gains in Friday trading. The server specialist’s share price ended the day trading up 10.9% with a gain of 1.2% for S&P 500 index and 1.7% for Nasdaq Composite index.
In addition to strong momentum for today’s broader market, shares of Super Micro Computer (also called Supermicro) got a big boost from new artificial intelligence (AI) spending guidelines from one of the biggest players in the technology industry. While some investors and analysts doubt whether the AI infrastructure investment cycle is losing steam, it seems Microsoft will dramatically increase their spending again.
Microsoft Vice President and President Brad Smith published a blog post on the company’s website today stating that the software giant plans to spend approximately $80 billion on AI infrastructure this year. By comparison, the company is expected to have capital expenditures of at least $53 billion by 2024, with the vast majority of that spending going toward building data center infrastructure for AI.
In other words, the software giant’s spending on AI hardware looks set to grow by as much as 51% in 2025. The biggest beneficiary of Microsoft’s surge in AI investment is likely to once again be Nvidia — a leading supplier of advanced graphics processing units (GPUs) for training and launching high-performance applications. But the guidance is also optimistic for the broader AI hardware space.
Microsoft is Nvidia’s biggest customer and Meta platform it comes second in purchases to the GPU leader. Meanwhile, Supermicro is the AI leader’s third largest customer, and Nvidia’s advanced GPUs are a core hardware component in its most advanced server products. With Microsoft once again poised to massively increase its spending on AI hardware, overall demand for Supermicrom in the AI server market looks good for 2025.
When it comes to Super Micro Computer’s business performance and stock outlook, demand doesn’t seem to be the problem. Valued at roughly 12 times this year’s expected earnings and less than 80% of expected sales, the company also looks cheap based on many traditional valuation metrics. On the other hand, there is still a lot of uncertainty surrounding the stock.
Supermicro has yet to file its annual 10-K report for its 2024 fiscal year, which ended June 30, 2024. The company’s financial auditor resigned from his role last October citing concerns that he could not rely on management’s statements and independence audit committee of server experts. Supermicro has since brought in BDO as its new financial auditor and expects to file its 10-K report by February 25. Depending on whether Supermicro makes significant downward revisions to previously reported financial results when it finally files its 10-K, the stock could make big moves in either direction.
