Super Micro Computer (NASDAQ:SMCI) shares tumbled more than 13% Friday, but the AI momentum for the stock, which has risen more than 220% so far this year, is expected to continue.
The incredible run higher has been fueled by surging demand for the server company's high-performance rack servers as a result of the rise in new artificial intelligence (AI) applications.
The year-to-date gains have been monumental, but over the last 12 months, it is even better reading for the company, up over 867%. It hit an all-time intraday high of over $1,077 per share on Friday before its fall.
Earlier this week, Bank of America labeled the company a "powerhouse in a fast-growing market," initiating the stock with a Buy rating and a price target of $1,040.
"Analysts think this provider of server and storage solutions will be a beneficiary of AI-driven demand growth," they wrote.
"Analysts believe the market for AI servers is much larger than is factored in Street models. Analysts expect the market for AI servers to grow, on average, 50% CAGR over the next three years, vs. historical growth of the overall server market (5.5% CAGR over the past 17 years), and they expect Super Micro's revenue to grow even faster-driving market share gain," they added.
Meanwhile, in a note today, Wells Fargo was more neutral, initiating the company with an Equal Weight rating and a $960 price target. The firm said they expect the AI momentum to continue but believe the shares are already discounting solid upside.