Following a rocky start at its IPO launch on March 29, 2007, Supermicro, a high-performance server provider, has witnessed substantial returns. Initially priced at $8 per share, below the anticipated $9.50-$11.50 range, the company now boasts an impressive market performance. A $1,000 investment in the IPO would now be valued at $35,600, significantly outperforming an equivalent investment in an S&P 500 index fund which would have only appreciated to around $4,200.
Despite facing stiff competition from industry giants like Hewlett-Packard Enterprise and Dell Technologies (NYSE:DELL), Supermicro has thrived in the expanding tech markets. The company's decision to sever ties with Chinese manufacturers in 2019 amid spy chip allegations did not hinder its growth trajectory.
The company has seen a surge in business due to a rise in AI applications. Supermicro's partnership with Nvidia (NASDAQ:NVDA) for pre-built AI servers has played a pivotal role in this growth. CEO Charles Liang reported "unprecedented demand" for advanced applications such as optimized rack-scale solutions.
Analysts from Northland Capital Markets suggest that Supermicro is gaining customers from competitors like Hewlett-Packard Enterprise and Dell. This has resulted in the company doubling its AI server market share. The popularity of generative AI platforms, including OpenAI's ChatGPT, has further fueled this growth.
As of Tuesday, Supermicro's stock was trading at $285, higher than both Hewlett-Packard Enterprise and Dell. Despite this high trading value, Supermicro's rapid growth justifies its valuation. The stock trades at 17 times forward earnings which makes it cheaper when viewed as an AI stock compared to bellwethers like Nvidia and Microsoft (NASDAQ:MSFT).
Looking ahead, the company expects a revenue rise of between 33%-47% in fiscal 2024. Analysts also predict a 42% adjusted EPS growth, reinforcing the company's strong market position and potential for continued growth.
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