Super Micro slides after margin, profit forecasts disappoint

Super Micro Computer shares tumbled 12.3 per cent in premarket trading on Wednesday as concerns over the high cost of producing AI server chips weighing on its profit forecast, eclipsing upbeat sales forecasts.

The company's fourth-quarter adjusted gross margin was 11.3 per cent, compared with analysts' average estimate of 14.1 per cent, according to LSEG data, as Super Micro grappled with higher supply chain costs and a tight inventory of key components.

CEO Charles Liang, however, reassured investors that margins would return to a normal range before the end of fiscal 2025 and reiterated its gross margin target in the range of 14 per cent to 17 per cent.

The company forecast current-quarter profit below Wall Street targets but expects first-quarter and annual sales above estimates.

Rival Dell Technologies, which makes AI PCs and AI servers, dropped 2.4 per cent.

Other chipmakers, however, were broadly higher after taking a hammering recently on concerns over their lofty valuation in a slowing economy. Nvidia and Broadcom rose 1.2 per cent and 1.4 per cent, respectively.

Among the biggest beneficiaries of the AI boom, Super Micro's shares have more than doubled in value in 2024, making it the best performing S&P 500 stock up to Tuesday's close.

It trades 17.24 times its 12-months forward earnings estimates, compared to Dell's 11.07 multiple.