Microsoft (MSFT) appears to be stepping back on multiple data center projects worldwide — including in the U.S., U.K., and Australia — raising new doubts about the speed of artificial intelligence (AI) infrastructure development. Although Microsoft maintains it will invest $80 billion in capital expenditures in the current year, the change has raised investor concerns nonetheless.

One firm squarely in the crosshairs is Super Micro Computer (SMCI), a top AI server vendor whose growth narrative is tightly linked with the capital expenditure of the hyperscalers. With data center demand flagging, the question lingers: Is SMCI’s parabolic run ahead of itself?

About Super Micro Computer Stock

Super Micro Computer (SMCI) is a U.S.-based company that develops energy-efficient, application-optimized servers for AI, cloud, and enterprise data centers. Headquartered in San Jose, California, the company serves big-name hyperscalers and gains directly from AI-driven infrastructure expenses. SMCI has a market capitalization worth $19.2 billion.

Shares have been incredibly volatile, jumping from a 52-week low of $17.25 to a $102.23 peak, then backing down recently to $32.32 to close out April 3. That represents a precipitious correction of almost 72% from its high, and a 70% fall over the last year — with a five-year return over 1,400%.

SMCI stock trades at a forward P/E ratio of 16.1x and a trailing price-earnings ratio of 14.7x, with a price-sales ratio of 1.39x. Although the valuation appears modest when compared to the company’s historical growth, it indicates increasing apprehension over future momentum. 

Super Micro Beats on Earnings

Super Micro Computer posted early Q2 fiscal 2025 numbers that revealed top-line growth but indicated moderation on the side of profits, as the company invests substantially in gearing up operations for next-generation AI infrastructure. For the fiscal second quarter that ran through Dec. 31, 2024, SMCI anticipates reporting revenues between $5.6 billion and $5.7 billion, a 54% year-over-year growth at the midpoint, led by demand for its high-end server platforms in AI and data center deployments.

Although growth in revenues was strong, profitability began to plateau. GAAP EPS will be between $0.50 and $0.52, the same as the same year-ago period. On a non-GAAP basis, EPS will be between $0.58 and $0.60, representing a modest year-over-year growth of 5%. Gross margin in the quarter will be between 11.8% and 11.9% on both GAAP and non-GAAP reporting, with the latter adjusting for the impact of some $6.7 million worth of stock-based compensation.

As of Dec. 31, 2024, SMCI had a cash and cash equivalents position of $1.4 billion and a debt position of $1.9 billion, including $1.7 billion in convertible notes. That capital position will fund the company’s aggressive growth plans, including becoming the leading supplier of direct-liquid cooling (DLC) — a technology anticipated to be used in over 30% of future data centers in the coming 12 months.

Looking ahead, SMCI issued Q3 FY2025 guidance, with revenue between $5.0 billion and $6.0 billion, GAAP EPS of $0.36 and $0.53, and non-GAAP EPS of $0.46 and $0.62. Management estimates a tax rate of 10.7% for GAAP and 12.7% for non-GAAP, on diluted shares of 642 million and 653 million, respectively.

But in a major revision, the company lowered full-calendar-year revenue guidance from $26 billion to $30 billion to $23.5 billion to $25 billion, based on timing revisions in AI server demand as well as architecture changes. CEO Charles Liang reiterated long-term growth confidence and forecast $40 billion in FY2026 revenue.

What Do Analysts Expect for Super Micro Computer Stock

Out of the 14 covering analysts, SMCI comes with a “Hold” consensus recommendation and an average grade of 3.29 out of 5. There are three “Strong Buy,” two “Moderate Buy,” and seven “Hold” ratings, alongside two “Strong Sell” recommendations.

Although analyst sentiment has lifted somewhat over the past month, it’s still mixed. It’s muted by the concerns over future earnings stability as a result of potential capex postponements by Microsoft and other hyperscalers.