Super Micro Computer (SMCI 0.58%) stock posted big gains in Friday's trading. The server specialist's share price closed out the day's trading up 10.9% amid gains of 1.2% for the S&P 500 index and 1.7% for the Nasdaq Composite index.
NASDAQ: SMCI
Key Data Points
In addition to bullish momentum for the broader market today, Super Micro Computer (also called Supermicro) stock got a big boost from new artificial intelligence (AI) spending guidance from one of the tech industry's biggest players. While some investors and analysts have questioned whether the AI infrastructure investment cycle is losing speed, it looks like Microsoft will once again dramatically increase its spending.
Super Micro Computer stock surges on Microsoft's AI spending outlook
Microsoft Vice Chair and President Brad Smith published a blog post on the company's website today indicating that the software giant plans to spend approximately $80 billion on AI infrastructure this year. For comparison, the company is expected to have capital expenditures of at least $53 billion for 2024, with the large majority of that spending going toward building out its data-center infrastructure for AI.
In other words, it looks like the software giant's spending on AI hardware will increase no less than 51% in 2025. The biggest beneficiary of Microsoft's AI investment ramp will likely once again be Nvidia -- the leading provider of advanced graphics processing units (GPUs) for training and running high-performance applications. But the guidance is also bullish for the broader AI hardware space.
Microsoft is Nvidia's largest customer, and Meta Platforms comes in at second place in purchases from the GPU leader. Meanwhile, Supermicro is the AI leader's third-largest buyer, and Nvidia's advanced GPUs are the fundamental hardware component in its most advanced server products. With Microsoft once again poised to massively increase its AI hardware spending, the overall demand outlook for Supermicro in the AI server market is looking strong for 2025.
What comes next for Supermicro?
When it comes to Super Micro Computer's business performance and stock outlook, demand does not appear to be the problem. Valued at roughly 12 times this year's expected earnings and less than 80% of expected sales, the company also looks cheap based on many traditional valuation metrics. On the other hand, there's still a lot of uncertainty surrounding the stock.
Supermicro has yet to file its annual 10-K report for its 2024 fiscal year, which ended June 30, 2024. The company's financial auditor resigned from its role in October of last year citing concerns that it could not rely on statements made by management and the independence of the server specialist's audit committee. Supermicro has since brought on BDO as its new financial auditor and expects to have its 10-K report submitted by Feb. 25. Depending on whether Supermicro winds up making material downward adjustments to previously reported financial results when it finally files its 10-K, the stock could make big moves in either direction.
