From Nasdaq:

Super Micro Computer has become a top pick among investors due to its strong position in AI. The stock surged nearly 250% in 2023, and current revenue guidance for 2024 is in the range of $10 billion to $11 billion. However, Super Micro faces tough competition from companies like Cisco, Dell, and Hewlett Packard in the server and storage market.

Super Micro may seem like a good value based on forward earnings growth, with shares trading for 26 times trailing 12-month EPS and 16 times expected EPS for fiscal 2024. However, the company’s growth is dependent on sales of AI servers from partners like Nvidia and AMD. It is a derivative bet on those companies’ performance.

Despite strong results from riding the AI wave, Super Micro faces key disadvantages in the competitive field. The company’s growth and profitability are heavily reliant on chip design partners, as it has limited ability to stave off long-term competitors and lacks significant patent protection. For these reasons, passing on Super Micro stock is the best decision for long-term investment.



Read more: 3 Reasons I’m Passing On Super Micro Computer Stock in 2024