Why American Superconductor Rocketed Higher Today

Key Points

• American Superconductor smashed earnings expectations last night.

• Its technology sits in a sweet spot of artificial intelligence (AI) data center growth right now.

• However, the already frothy stock is now extremely frothy.

• 10 stocks we like better than American Superconductor ›

Shares of American Superconductor (NASDAQ: AMSC) rallied 27.4% on Thursday as of 12:24 p.m. ET.

American Superconductor is an interesting company that sells power routing equipment and software, which enables power distributors and customers to control the flow of electrical current as it transmits electricity between the grid and power producers or end customers.

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Last night's earnings report shows the company is clearly benefiting from activity related to artificial intelligence (AI) data center growth.

Booming revenue shows a strong data center capex cycle

In its first fiscal quarter, AMSC saw revenue surge 80.9% year-over-year to $72.3 million, while adjusted non-GAAP (generally accepted accounting principles) EPS more than tripled to $0.30, with both figures handily beating analyst expectations.

In the release, AMSC CEO Daniel P. McGahn noted:

Strength in the semiconductor market -- driven by growing demand for applications such as artificial intelligence and data centers -- contributed to our momentum, while bookings and backlog remained steady. These results highlight our continued progress in scaling the business, diversifying revenue streams, and driving outstanding financial performance.

Image source: Getty Images.

A soft guide didn't seem to affect sentiment

Even though revenue and earnings boomed last quarter, management only guided for $65 million to $70 million in revenue, and adjusted EPS of $0.14, which would be a slight sequential decline. Still, investors appear to be looking through that quarter-to-quarter lumpiness to a larger picture of AI-powered growth over the longer term.

While AMSC is a very interesting company with promising technology, investors should be careful chasing AMSC stock, given that the company sells mostly hardware, and its valuation is now over 100 times this year's adjusted earnings estimates.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.