NVDA - Is Super Micro Computer's S&P 500 Inclusion An Opportunity Or A Trap?

2024-03-15 10:41:08 ET

Summary

• Super Micro Computer, Inc. enters the S&P 500 today, which should increase institutional interest in the stock, particularly from key index funds.
• This momentum complements strong underlying fundamentals exhibited at SMCI. The company is on track to doubling its revenues by the end of FY 2024.
• The recent $1.5B convertible notes issuance also bolsters its liquidity for unlocking incremental AI-driven growth not yet captured in management's previous guidance.
• Paired with improving supply availability, SMCI is well-positioned to outperform its previously guided annual revenue run-rate of $20B exiting FY 2024. This will also enable continued operating leverage improvement and bolster profitability.

Super Micro Computer, Inc. ( SMCI ) enters the S&P 500 (SP500) today. The stock has remained on a persistent upsurge since the inclusion announcement earlier this month, as it faces higher than usual demand in anticipation of additional institutional interest – particularly from index funds. We view this as complementary to SMCI’s AI-driven fundamental outperformance in supporting the stock’s year-to-date momentum.

SMCI has clearly differentiated itself as a key leader in capturing emerging AI opportunities, which is consistent with our optimism as discussed in a coverage on the stock last year. Specifically, we had viewed SMCI as one of the few names that have yet to grow into its full AI prospects at the time of our analysis last year. But the latest results have surpassed even our bull case from last year's coverage, while also is corroborating further upside potential to come....

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