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Super Micro Computer shares tanked on Friday. Is it time to sell?

Super microcomputer (NASDAQ: SMCI) stocks have been riding the wave of artificial intelligence (AI). Nvidia started. That makes sense to a certain extent. Super Micro provides the data center computing stacks that run the AI ​​content powered by Nvidia’s chips and software.

But Super Micro stock fell more than 20% today in late Friday afternoon trading. Still, the stock is up more than 150% so far this year. So investors may be wondering if it’s time to take those gains, or if today’s plunge means the stock is now a bargain.

Super Micro is not Nvidia

Today’s price drop may have occurred for an interesting reason. The company did not provide investors with any news other than the press release telling investors that Super Micro would report its Q3 2024 earnings results on April 30. But what was interesting was that this was the only press release. .

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In seven of the past eight quarterly periods, the AI ​​hardware company has also released its financial results, mainly to prepare investors for a better-than-expected report. Now investors fear that the upcoming report will not contain a positive earnings surprise.

Super Micro previously told investors to expect revenue of between $3.7 billion and $4.1 billion for the quarter. The Wall Street consensus is for revenue of about $4 billion and earnings of $5.84 per share. That compares with revenue of approximately $3.7 billion and net income per common share of $5.10 in the previous fiscal second quarter.

But investors expected more, as shares have more than doubled in the past three months. That said, Super Micro wouldn’t ride on Nvidia’s AI coattails forever. Even as revenue has risen thanks to the boost from data center growth, Super Micro reported a gross profit margin of just 15.4% in its most recent quarterly report, compared to 16.7% in the same period last year. The products are more of a commodity than Nvidia’s hard-to-obtain chips.

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Today’s decline implies that investors may think this will be the quarterly report where that will become clearer.

Should You Invest $1,000 in Super Micro Computer Now?

Consider the following before buying shares in Super Micro Computer:

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Howard Smith has positions at Nvidia. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Super Micro Computer shares tanked on Friday. Is it time to sell? was originally published by The Motley Fool

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