Super microcomputer (NASDAQ: SMCI) The stock fell during Thursday’s trading. The server specialist’s share price ended the daily session down 3%, according to data from S&P Global Market Intelligence. The stock was up as much as 11.3% at the start of the trading day.
While there was no company-specific news driving Supermicro’s initial gains today, investors piled into the stock after Nvidia‘S (NASDAQ: NVDA) strong first quarter results. But the bullish momentum waned and gains did not last.
Volatility hits Supermicro stock after Nvidia’s first quarter report
Supermicro buys graphics processing units (GPUs) from Nvidia and uses them as key components in the servers it sells. These servers are in high demand as companies have moved to quickly deploy and scale artificial intelligence (AI) software.
Nvidia reported first-quarter results after the market closed yesterday, once again posting results that shattered market expectations. The AI leader reported non-GAAP (adjusted) earnings per share of $6.12 on revenue of $26.04 billion. Meanwhile, an average of analysts surveyed by the London Stock Exchange Group had suggested the company would post adjusted profits of $5.59 per share on revenues of $24.65 billion.
Nvidia has become the clearest and most intensely scrutinized indicator of the state of the AI industry. The company’s powerful GPUs are the foundational hardware that paved the way for the creation and scaling of today’s most advanced and popular artificial intelligence software. Some investors may have expected Nvidia’s results to deliver bigger price appreciation for Supermicro stock, and it appears a significant number of shareholders opted to take profits as momentum started to falter.
After a huge run, are Supermicro shares still a buy?
Shares of Super Micro Computer have skyrocketed about 414% over the past year, even after today’s slight pullback. With the shares currently trading at around 36 times this year’s expected earnings, the server specialist’s share price is already experiencing strong growth.
On the other hand, the company has also achieved tremendous revenue and profit growth. There are also good reasons to think that the artificial intelligence revolution is still in its early stages.
For risk-tolerant investors looking for long-term bets in the AI space that still have the potential to deliver strong returns, I think Supermicro stock is still worth buying. The potential for competitive and macroeconomic pressures to create valuation volatility is certainly there, but the company has strong tailwinds at its back.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Supermicrocomputer shares fell today despite Nvidia’s blockbuster quarter – is this a buying opportunity? was originally published by The Motley Fool
