The AI boom could be on the next leg. Microsoft While AI-based cloud computing has been reported to be accelerated, Openai’s ChatGPT has attracted hundreds of millions of users worldwide. One strain that benefits from this recovery is Super Microcomputer(NASDAQ: SMCI). Datacenter assembler rose about 20% last month and received an upgrade from Wall Street analysts.
Should I buy a super microcomputer stock for my next leg up with AI?
Over the past five years, Super Micro Computer revenue has exceeded 500%. This is due to increased spending on data center solutions from AI infrastructure providers such as Microsoft. Super Micro Computer is a data center assembly expert with advanced computer chips such as: nvidiaSuper microcomputers are spending a lot of money.
Companies like Microsoft will access Super Micro computers for AI data center outsourcing and try to build computing resources as quickly as possible to meet demand as much as possible. Management is currently deriving revenues of $21.8 billion to $22.6 billion this fiscal year (ends in June). This is a slight decline from previous guidance, but still shows strong growth from revenue of $15 billion in last fiscal year.
Stock rockets are getting higher in super microcomputers as demand appears to be being brought to AI infrastructure once again. However, it is down 67% from an all-time high and currently has a market capitalization of $23 billion.
Image source: Getty Images. Super Micro Computer is an AI beneficiary.
A super microcomputer is simply an intermediary between computer chips and data centers. Nvidia has a 62% operating margin. Amazon Web Services (AWS) has an operating profit ratio of 37.5%. Last quarter, the super microcomputer Total margin Less than 10%.
What does this mean? Super Micro Computer can sell a small product at a small premium for input costs, providing a very small profit margin compared to suppliers and customers. Nvidia and the AI Cloud Infrastructure Companies have a lot of power in this relationship. Last quarter, the slim operating margin for super microcomputers was just 3.2%.
This could cause problems in a cyclical recession and will ultimately come to the AI market. This is an ideal sales environment for super microcomputers – we couldn’t demand more customer demand, but still generate little profit.
Currently, things are going well for super microcomputers. Stocks have grown by more than 1,000% over the past five years, including recent drawdowns. The stock still looks cheap, with a market capitalization of $23.2 billion, with a 19 futures price-to-earning ratio. As demand for AI data center assemblies continues to increase, stock prices will rise in a few years.
I still don’t think it’s a good purchase for my long-term portfolio. A cyclical recession will ultimately arrive at data center spending, which almost certainly leads to a decline in the profit margins of super microcomputers. Given the already thin profit margins of razors with demand for products and services on the fever pitch, it is possible that you will lose money if the cycle inevitably reverses. This may not happen in a year or five years, but it does.
Super microcomputers have thin margins as they provide the least value for the AI sector. This comes from Nvidia’s innovative computer chips, innovative computer chips that can be sold at premium prices, and cloud infrastructure providers that sell computing power to software companies. Super Micro Computer currently has a lot of revenue, but it’s just a broker’s packaging computer chip. It’s practically uncompetitive.
Super microcomputers are growing rapidly today and appear to be trading at a low price, but investors are wise to avoid buying stocks. This is a cyclical company that does not have a long-term competitive advantage in the industry.
Consider this before purchasing stock on a super microcomputer.
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Brett Schafer There is no position in any of the stocks mentioned. Motley Fool has jobs at Microsoft and Nvidia and recommends. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. To Motley’s fool Disclosure Policy.
