Prediction: Here is the direction Super Micro Computer is heading in 2025

Super microcomputer (SMCI -0.77%) started this year with strength. Profits rose rapidly, and in the following months the S&P 500 and Nasdaq 100 invited the stock to join in. The stock’s performance even exceeded that of the market darling Nvidia. The stock rose 188% in the first half of the year, while Nvidia gained 149%.

But times have been more difficult for Supermicro in recent weeks. A research firm with a short position in the stock released a report alleging problems at the company. Around the same time, Supermicro, in an unrelated move, delayed filing its 10-K annual report. And more recently, The Wall Street Journal reported that the Justice Department had opened an investigation into Supermicro.

All of this has weighed heavily on Supermicro, pushing shares down 25% since its brief report in late August. And that’s why the market is wondering what’s next for this tech company. My prediction is that Supermicro will head in this direction in 2025…

Supermicro’s earnings growth

However, before I talk about my forecast, let’s take a quick look at Supermicro’s journey so far. This technology company is not new to the market, but has been around for more than 30 years and sells workstations, servers and other devices. Supermicro grew its revenue steadily and became profitable over time, but profits really took off in recent years as the artificial intelligence (AI) boom accelerated.

SMCI net income data (annual) from YCharts

Companies developing AI platforms turn to Supermicro for their data center needs – and Supermicro’s strategy has helped the company emerge as a winner, achieving a growth rate five times faster than the industry average over the past 12 months .

Why is the company so successful? Supermicro works hand in hand with top chip designers throughout the entire development process in order to be able to immediately integrate their innovations into its products. Additionally, Supermicro’s “building block” technology – in which most products share common parts – makes it faster for the company to tailor a particular product to a customer’s needs.

All of this helped Supermicro achieve quarterly sales this year that exceeded a full year’s worth of sales as recently as 2021. And given the projected growth of the AI ​​market — expected to grow from $200 billion today to $1 trillion by the end of the decade — Supermicro could continue to see revenue increase.

A short report and further headwind

Of course, the negative news of the last few weeks remains a headwind at the moment. Let’s look at the details. Hindenburg Research alleged in its brief report “glaring accounting red flags” and other problems at Supermicro. It’s important to note that Hindenburg has a short position in Supermicro, meaning the company stands to benefit from a share price decline – and that makes it difficult for us to rely on Hindenburg for unbiased information. Supermicro also responded to the report saying the claims were “false or inaccurate” and promised to further address the matter “in due course.”

Regarding the delayed annual report, Supermicro also commented further and said that it does not expect any significant changes to its earnings figures. That should reassure investors.

Finally, as for the possible Justice Department investigation, The Wall Street Journal cited people familiar with the matter – but an investigation was not confirmed. And the magazine said Spokespeople for Supermicro and the U.S. Attorney’s Office declined to comment.

My forecast for 2025

Taking all of this into account, my forecast for Supermicro in 2025 is as follows. It is currently unclear whether the Justice Department has opened an investigation. If this is the case and problems arise, it could weigh on the stock – but only the extent of potential problems would tell us to what extent.

However, there are a lot of “ifs” and I prefer to go with what we actually know so far. And we know that Supermicro’s business has been strong in recent years and demand from AI customers continues. In fact, these customers are now looking for cooling technology for their AI data centers – and Supermicro is a specialist. This could mean a whole new wave of growth for the company starting in 2025.

Additionally, Supermicro, which reported a lower gross margin last quarter, plans to open a new factory in Malaysia later this year – a move that is expected to reverse that trend as the company focuses on high volumes and low costs.

So my prediction is that Supermicro’s profits and share price could rise in 2025 if the allegations regarding the company are not confirmed. The average Wall Street estimate is for an 87% rise over the next 12 months, and barring recent troubles, I think the stock could meet those expectations as it gains traction wins.

Does this make Supermicro stock a buy? Possibly – if you are an aggressive investor. But otherwise, it’s important to remember that the stock is still risky right now, especially if you’re a cautious investor. And that means it’s probably a good idea to wait for further clarity on recent headwinds before buying shares of this AI stock.