Super Micro Computer (NASDAQ: SMCI) provided some disappointing preliminary guidance today, but that didn’t stop the stock from soaring. Investors are brushing off past problems and even news that revenue will come in at the low end of the company’s guidance.
That’s because Supermicro shocked investors with the news that the company’s profit margin for the fiscal quarter ended June 30 will be twice what was previously expected. That led the stock to rocket 22.5% higher, as of 10:35 a.m. ET.
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AI servers are booming
Supermicro said revenue will come in “near the low end” of prior guidance for its fiscal fourth quarter ended June 30. But the market was stunned when the company also said it expects gross margin to be about double its previous estimate, at 15% to 17%.
It also reported a record backlog with over $60 billion in new orders received during the quarter. That tells investors that demand for artificial intelligence (AI) servers is very strong, and customers are paying up for what they need.
Supermicro is just one AI server maker. Past accounting issues and more recent allegations that a Supermicro co-founder smuggled AI servers into the Chinese market may make investors uncomfortable about owning Supermicro. Investors may want to consider Dell Technologies or Hewlett Packard Enterprise as alternatives to Supermicro.
It’s clear that the underlying business is booming, regardless of which stock one prefers.
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