Is it Too Late to Buy SMCI Stock?
Is it too late to get into SMCI after this parabolic run?
Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.
2024-02-17 11:31

Is It Too Late to Buy SMCI Stock?
While we’ve all been enamoured with the performance of chip giant NVIDIA ($822.49|3.43%) this year, there is another semiconductor stock that has demolished NVIDIA’s returns. That’s right, I’m talking about Super Micro Computer Inc (NASDAQ: SMCI), a company that was little known before its breakout so far in 2024. Year-to-date, SMCI has returned more than 250% to investors, dwarfing NVIDIA’s return of just 50%. SMCI now has a 52-week low price of $85.61 and an improbably 52-week high price of $1,006 per share.Is it Too Late to Buy SMCI Stock?
But is it too late to get into SMCI after this parabolic run? If you look at option flow, you’ll see that even months out, whales are trying to accumulate the stock at astounding prices. As long as the option flow remains this bullish, it is hard to see the stock coming back down to Earth for the foreseeable future.

Now, with that being said, it doesn’t mean you should mortgage the house to buy right now. As with any stock on a parabolic run, SMCI will cool off eventually. Just as NVIDIA has done this year, it’s time for SMCI to see a little mean reversion. Surprisingly, the forward PE isn’t terrible for SMCI. It currently sits at just 48.89, which is high for a stock but not as high as you would think given the stock’s performance this year.

There are also certainly some positive catalysts including a recent revenue revision by the company that shows an increase of 40% for its full-year guidance. Analysts are also starting to cover the stock with lofty price targets. Finally, now that the market cap has ballooned to more than $56 billion, it is likely too big of a component of the Russell 2000 small-cap index. What does that mean? It means it is likely looking at an S&P 500 inclusion in the coming years. That would certainly give the stock another boost in the right direction.

NVDA vs SCMI: Which Stock Should You Choose?
If it were me, the answer to this would be NVIDIA every day of the week and twice on Sunday. NVIDIA is the proven industry leader and has a staggering lead over its competition when it comes to AI chips. To be fair, SCMI deals more with data center infrastructure than semiconductors, so it isn’t an apples-to-apples comparison.

Still, in my mind, SMCI isn’t even in NVIDIA’s league. While SMCI may be a true bubble, NVIDIA has a proven track record and a long history of steady growth. NVIDIA is also on track to be the world’s most valuable company at some point in the near future, whereas SMCI is still a small potato compared to NVIDIA.

Now, when it comes to potential growth, SMCI does have more “upside”. Why? It’s the law of large numbers. NVIDIA is already a trillion-dollar company and once a company gets that big it is difficult to keep doubling in size. If SMCI can continue to perform and take advantage of the AI frenzy, then we could see SMCI outperform NVIDIA over the next few years. I’d still rather invest my money in NVIDIA right now.

As we saw on Friday, the downside for SMCI is even more pronounced. The stock sold off by about 20% during the session, which shows the danger of a parabolic stock chart. SMCI can provide the potential for higher returns, but it also has the real possibility of losing 90% of its gains in a short amount of time.

Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

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Published On
2024-02-17 11:31

About the Author
Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.

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