Why Super Micro Computer Stock Surged This Week

Super Micro Computer (SMCI +5.13%) stock has been rallying, which is a big relief for shareholders. Investors have sent shares of the artificial intelligence (AI) server and solutions technology company soaring by more than 50% over the past month, including a 28% gain this week, according to data provided by S&P Global Market Intelligence.

Some of that has been a bounce-back after the company’s co-founder, Yih-Shyan “Wally” Liaw, resigned in March following his indictment in a federal investigation concerning the alleged smuggling of technology to China.

Earnings this week have investors feeling more optimistic about Supermicro now, though. The question for investors is whether past troubles are truly behind the company.

Image source: The Motley Fool.

Has Supermicro turned the corner?

After a series of internal financial control and auditor questions over the past 18 months, Supermicro had to deal with the accusations against its co-founder this year. Those problems manifested in some lost business, and sales did decline year over year. But in the fiscal Q3 report this week, investors focused on rising margins. That led to increased earnings and sent the stock price soaring.

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NASDAQ: SMCI

Super Micro Computer

Today’s Change

(5.13%) $1.73

Current Price

$35.34

Key Data Points

Market Cap

$21B

Day’s Range

$32.31 - $35.64

52wk Range

$19.48 - $62.36

Volume

2.2M

Avg Vol

37M

Gross Margin

8.39%

The business itself has certainly stabilized. Demand for its server and storage data center solutions is high as the AI infrastructure build-out continues. The impact of past problems on its stock may also be behind it. That combination could be offering investors a good opportunity.

The question is whether internal financial control issues were a one-time item or a culture problem within the company. It’s a risk I’m not prepared to take, but other investors may be willing.