Super Micro Computer (NASDAQ: SMCI) shares soared along with other technology names yesterday after President Donald Trump paused the implementation of his global tariff plan. There was good reason why Supermicro shares outperformed the market with a 15.8% gain on that news.
But Supermicro stock is shedding much of that pop today. As of 11:19 a.m. ET, shares of the maker of high-end, liquid-cooled artificial intelligence (AI) servers were down by 5.9% after dropping more than 7% earlier in the session.
Added uncertainty for Supermicro
Supermicro has had its share of problems in the last year as it faced accounting questions and the risk of delisted shares. The stock jumped earlier this year, though, after the company released long-delayed financial filings and avoided being delisted from the Nasdaq exchange. Shares have since stabilized as investors wait for updates on the state of its business.
The stock rallied sharply yesterday thanks to temporarily reduced tariffs that would have impacted its overseas manufacturing capacity. Additionally, the semiconductors built into its servers have so far been exempt from Trump's tariff plan.
Investors see trouble and turbulence ahead, though. The semiconductor exemption might not last. Trump has warned that he will be addressing semiconductors and implied more duties will be coming. That could hit Supermicro's customers in a meaningful way, forcing it to cut its sales estimates. The company already has reduced its original guidance for fiscal 2025 sales from a range of $26 billion to $30 billion to a new range of $23.5 billion to $25 billion.
Additionally, Supermicro management told investors in its February conference call that it is increasing its global manufacturing footprint even as it also expands domestically. The overseas facilities help boost its profitability, too. Chief Financial Officer David Weigand told analysts, "If we can manufacture in Asia, we predicted that we would be able to save 1 to 2 points on the margin."
The bottom line is the future is murky for Supermicro's underlying business. Some investors are taking yesterday's bounce as an opportunity to exit the name today.
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Howard Smith has 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.
