Why Super Micro Stock Just Dropped
- Super Micro Computer stock fell 7.6% after Oracle canceled an order for 300 to 400 server racks.
- Analysts suspect Oracle dropped the deal due to concerns over illicit sales of Nvidia chips to China.
- xAI is delaying orders for older B200 GPU chips while preferring faster servers from Dell and HPE.
- The company faces potential inventory losses if it cannot sell obsolete AI chip stock quickly.
- Despite recent drops, Super Micro trades at 21 times trailing earnings with expected 26% annual growth.
- Bluefin Research notes the China scandal may cause further contract losses beyond Oracle's cancellation.
- The Motley Fool Stock Advisor excluded Super Micro from its list of top 10 stocks to buy now.
Bullish Signals
- Super Micro's valuation has dropped to only 21 times trailing earnings after an 18.5% price decline.
- Analysts still expect Super Micro to grow its earnings by 26% per year over the next five years.
- The stock currently trades with a PEG ratio of less than 1.0, indicating potential value.
Risk Factors
- Oracle canceled an order for 300 to 400 Super Micro GB300 NVL72 server racks.
- xAI is delaying orders for servers containing older Nvidia chips.
- Super Micro may face inventory losses if stuck with obsolete AI chip stock.
- Analysts suggest SpaceX prefers buying faster GB200 NVL72 servers from Dell and HPE instead.
Full Analysis
Super Micro Computer (NASDAQ: SMCI) shares fell 7.6% after Bluefin Research reported Oracle canceled an order for 300 to 400 GB300 NVL72 server racks due to potential illicit sales of Nvidia chips to China involving co-founder Yih-Shyan "Wally" Liaw. Additionally, xAI is delaying orders for older B200 GPU chips while favoring Dell and Hewlett Packard Enterprise (NYSE: DELL) (NYSE: HPE) for faster GB200 NVL72 servers, risking obsolete inventory losses for SMCI. Despite these issues, analysts project 26% annual earnings growth over the next five years with a valuation of 21 times trailing earnings and a PEG ratio under 1.0. The Motley Fool Stock Advisor excluded SMCI from its top 10 stock list, suggesting investors consider alternatives despite the company's recent price decline of 18.5% over the past year.