Goldman Sachs Downgrades Super Micro Computer Amid Rising AI Server Competition

Goldman Sachs downgrades Super Micro, calls for more than 20% downside from here

Rising competition in the artificial intelligence server space could lead to a pullback in Super Micro Computer shares, according to Goldman Sachs. The firm downgraded Super Micro to sell from neutral and decreased its price target by $8 to $32, implying 24% downside over the next 12 months. The move comes as the stock has substantially outperformed the broader market year to date. Super Micro has risen 38.3% in that period, while the S & P 500 has slid more than 3%. "SMCI stock is up 38% year-to-date, making it the best performing stock in our Hardware coverage," analyst Michael Ng wrote in a Monday note. "With the stock trading at 16X F2025E P/E, we view risk-reward as unfavorable given downside risks on valuation, competition, and gross margins." SMCI YTD mountain SMCI, year-to-date Among one of the reasons for anticipated pullback, Ng said that AI server competition is heating up partially due to "less product differentiation following [research and development] investments from competitors in recognition of the large market opportunity." As a result, Super Micro's market share in the space will likely come under pressure, he added. "SMCI's outlook for $40 bn in revenue in F2026 is predicated on a return to its leading market share position for upcoming GPU product cycles (e.g., Blackwell, Blackwell Ultra, Rubin) as components become available, which we believe will be difficult to achieve with more competition from both OEMs and ODMs relative to prior product cycles," the analyst said. Additionally, that rising competition - as well as other catalysts like upfront investments in new features and a changing customer mix - could weigh on the company's gross margins, Ng noted, specifically forecasting that its gross margins will decline to 12.2% in 2025 and 11.7% in 2026. A majority of analysts on Wall Street have stepped to the sidelines on Super Micro, a controversial stock because of its late financial reporting. Among the 14 covering the stock, only five have a buy rating, while eight have a hold rating, per LSEG data. However, its average target of about $53 still calls for gains ahead, implying more than 25% upside from Friday's close. The stock fell more than 2% in the premarket Monday following Ng's downgrade.

Super Micro Computer Feels The Heat From Competitors, Customers, Supplies - This Analyst Turns Bearish - Super Micro Computer (NASDAQ:SMCI)

Feel unsure about the market's next move? Copy trade alerts from Matt Maley -- a Wall Street veteran who consistently finds profits in volatile markets. Claim your 7-Day free trial now. While Super Micro Computer Inc's SMCI stock has gained 38% year-to-date, "making it the best performing stock in our Hardware coverage," there are downside risks on valuation, competition and gross margins, according to Goldman Sachs. The Super Micro Computer Analyst: Analyst Michael Ng downgraded the rating for Super Micro Computer from Neutral to Sell, while reducing the price target from $40 to $32. The Super Micro Computer Thesis: Recognizing the large market opportunity in AI servers, competitors have made significant R&D investments, which could pressure the company's market share leadership in the segment, Ng said in the downgrade note. Check out other analyst stock ratings. "Super Micro Computer's gross margins are likely to contract in 2025 through 2027 due to intensifying competition and the AI compute transition from Hopper to Blackwell," the analyst stated. "The company not only has high levels of customer concentration but also high supplier concentration, which "puts it into a price-taking position," he added. Super Micro Computer's stock still trades at a premium to its server OEM peers, which is likely to converge due to the "lack of differentiation in AI server product" and risks associated with high customer and supplier concentration. SMCI Price Action: At the time of publication on Monday, shares of Super Micro Computer had declined by 1.83% to $41.38. Read More: Super Micro AI Servers Get Nvidia Boost, But SMCI Plunges 25% After Delayed Filing: Valuation Tumbles 80% In 3 Weeks Photo: Shutterstock SMCISuper Micro Computer Inc$41.13-2.43%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum13.76Growth94.33Quality98.03Value68.72Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs