SMCI Rises 6.4% in a Month: Should You Buy, Sell or Hold the Stock?

Super Micro Computer SMCI stock has climbed 6.4% in the past month, underperforming the Zacks Computer- Storage Devices industry’s return of 23.6%.

SMCI One Month Price Performance Chart

The stock is at a discounted valuation despite the rise. At present, SMCI stock trades at a forward 12 months P/E ratio of 20.45X, which is lower than the 21.76X of the Zacks Computer- Storage Devices industry, making investors wonder — should they hold on to SMCI stock, or is caution the wiser path?

SMCI 12 Month (P/E) Valuation Chart

SMCI is Propelled by Growth in Server, Storage and Cooling

Super Micro Computer’s Data Center Building Block Solutions is experiencing traction among customers operating in artificial intelligence, hyperscale and high-performance computing space. For future prospects, Super Micro Computer is positioned to play a leading role in the transition toward more sustainable and high-performance data centers.

The company has become a major player in the AI server market, delivering systems built on the latest NVIDIA and AMD platforms. SMCI’s strong AI server and storage offerings have fueled strong top-line growth. In fiscal 2025, Super Micro Computer’s revenues increased 47% year over year to $22 billion, and SMCI expects fiscal 2026 revenues to touch $33 billion.

SMCI’s next-generation air-cooled and liquid-cooled GPU and AI platforms are experiencing massive growth in traction, leading to more than 70% contribution to its top line in the fourth quarter of fiscal 2025. Both the enterprise and cloud service providers are adopting SMCI’s cooling technology.

The company’s direct liquid cooling technology is in high demand among hyperscalers and AI data centers as the liquid cooling technology reduces heat more effectively than its air cooling counterparts. Now the company has introduced DLC-2, which not only reduces electricity consumption by 40% but also lowers the cost of water and space while decreasing noise. These factors keep SMCI at the forefront of the server market. However, SMCI is also facing some key challenges.

SMCI Faces Competitive and Inventory Headwinds

Rising competition from the leading companies in the storage and server space, such as Pure Storage PSTG, Dell Technologies DELL and Hewlett Packard Enterprise HPE, is a concern for investors.

In the storage space, Pure Storage offers a range of modern storage solutions through its offerings like FlashArray, FlashBlade and Pure Cloud Block Store to serve the purpose of providing All-Flash performance, cloud integration, AI and simplified management.

In the AI-optimized server space, Dell Technologies is a strong competitor. Hewlett Packard Enterprise also offers a range of server services, including HPE ProLiant, HPE Synergy, HPE BladeSystem and HPE Moonshot servers.

Despite the massive potential of SMCI’s server offerings, the company is facing other near-term challenges, including delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms.

SMCI is also facing margin contraction due to the growing price competition and price adjustments as companies are second-guessing their shift from older to newer platforms like Blackwell. SMCI’s near-term margin outlook is dim. The Zacks Consensus Estimate for SMCI’s first and second quarters of fiscal 2026 shows a decline of 37% and 5%, respectively.

Conclusion: Hold SMCI Stock Now

Super Micro Computer is facing a mixed bag of challenges while pursuing long-term growth across server, storage and cooling products. Considering all these factors, we suggest that investors should hold this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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