Smci Stock News Today

Super Micro Computer, Inc. (SMCI) saw its stock price drop by 10% after announcing a delay in filing its Annual Report on Form 10-K for the fiscal year ending June 30, 2024. The company intends to file a Notification of Late Filing on Form 12b-25, citing the need for additional time to evaluate the effectiveness of its internal controls over financial reporting.

This delay has sparked increased scrutiny, particularly following a critical report from Hindenburg Research that raised concerns about SMCI’s accounting practices and corporate governance. The report questioned the company’s revenue recognition methods and its decision to rehire executives previously involved in accounting scandals, which has exacerbated investor worries and contributed to the stock’s decline.

Market reactions underscore growing investor unease, especially given SMCI’s history, including a previous delisting from Nasdaq in 2018.

The Companies: Nvidia vs. SMCI

First, let’s understand what these companies actually do.

• Nvidia: Known for making the “brain” of the AI car, Nvidia has a history of innovation, starting with video cards and then pivoting to Bitcoin mining devices. Now, they dominate the AI chip market, making the best brains for AI technology. They’ve become the gold standard, outpacing competitors like AMD.
• Super Micro Computer Inc. (SMCI): Think of SMCI as the “chassis” of the AI vehicle. While Nvidia makes the engine, SMCI builds the frame—designing servers with advanced cooling features that are crucial for AI. They’ve recently gained traction, especially over the last four quarters, thanks to their superior technology, attracting clients like Microsoft, Amazon, and IBM.

Fundamentals: Who’s Driving Revenue?

Both companies are strong contenders, but let’s look at their revenue growth.

• Nvidia is a well-established player, with consistent innovation driving their growth. They recently blew past Wall Street’s expectations and raised their future guidance, confirming a strong fiscal year ahead.
• SMCI had a mixed earnings report recently, missing revenue targets but still posting impressive year-over-year growth. They’re heavily dependent on Nvidia, as they need Nvidia’s chips to meet the $25 billion in pending orders. This dependency is a double-edged sword; while it signifies strong demand, supply chain issues are causing delays.

Despite the recent revenue miss, SMCI is projecting a stronger year ahead, with both companies being bullish from a fundamental standpoint.

Technicals: The Market’s Pulse

Now, let’s talk technicals.

• Nvidia: Nvidia’s stock has been on a roll, up 70% year-to-date and 200% over the last year. However, it’s currently experiencing a technical correction, with shares dropping more than 10% from their highs. This correction could be a response to the broader market’s “AI fatigue,” where investors are growing tired of waiting for AI revenues to materialize.
• SMCI: Similar to Nvidia, SMCI’s stock is also experiencing some volatility. After a strong run, the stock saw a sharp 20% drop when they confirmed their earnings date without giving a sneak peek at revenue. However, the $700 level has emerged as a key support, with the market already pricing in a worst-case scenario.

Sentiment: Market Expectations

Sentiment plays a crucial role in stock performance. Nvidia, despite being a market darling, is starting to feel the effects of sky-high expectations. The market is showing signs of rotating out of AI-heavy names like Nvidia, driven by concerns about overvaluation and potential bubbles in the AI space.

On the other hand, SMCI, while not as popular, has seen more tempered expectations, which could work in its favor. The market’s reaction to SMCI’s recent earnings miss suggests that the stock is already priced for caution, making it potentially less vulnerable to negative surprises.

The Verdict: Which One Should You Buy?

So, which stock would I choose? Both Nvidia and SMCI have their merits, but if I had to pick one, I’d lean towards Super Micro Computer Inc. Here’s why:

1. Valuation: SMCI is currently trading at a level where the market has already priced in the bad news. This could offer a more favorable risk-reward profile compared to Nvidia, which might be more vulnerable to further corrections.
2. Growth Potential: While Nvidia is the dominant player in AI chips, SMCI’s role in providing the infrastructure that supports AI growth makes it a compelling investment, especially as they resolve their supply chain issues.
3. Market Sentiment: Nvidia’s high expectations could be a double-edged sword. If they miss even slightly, the stock could face significant pressure. SMCI, with more modest expectations, might be better positioned to surprise on the upside.

Final Thoughts

Both Nvidia and SMCI are strong companies with bright futures, but when it comes to the “Would You Rather” game, I’d choose SMCI for its balanced growth potential, valuation, and market sentiment. Whether you’re a long-term investor or a trader looking for your next move, keep an eye on both stocks as they continue to navigate the evolving AI landscape.