Super Micro Computer Inc.âs monster rally was stalling Friday, as its stock headed for a dramatic drop that would snap its longest winning streak in over seven years.
Shares of the server maker had run up nearly 200% in a month, through Thursdayâs close, and had catapulted some 900% on a 12-month basis as well. Wall Street seems excited about Super Microâs
SMCI,
potential to capitalize on the artificial-intelligence frenzy, but Wells Fargoâs Aaron Rakers suggested that this enthusiasm may already be baked into the stock price.
Super Microâs stock was sliding about 17% in afternoon action and on pace to break a nine-session winning streak. That streak was its longest since another nine-session run of gains that ended Aug. 1, 2016, according to Dow Jones Market Data.
The stock was also on track to see its largest one-day percentage drop since it fell 23.4% on Aug. 9, 2023.
Wells Fargoâs Rakers initiated coverage of Super Micro shares with an equal-weight rating and $960 target price Friday, writing that the stock was already discounting a pathway to upwards of $40 a share in earnings by 2025.
See also: Super Microâs stock has surged 900% in a year. Why BofA is making a âbuyâ call.
Rakers cheered the stockâs âAI-fueled fundamental momentum,â which âhas been nothing less than remarkable,â in his view. He attributed the companyâs traction in part to its âengineering-first differentiation,â as the company historically has allocated 40% to 50% of its headcount to research and development roles.
Super Microâs âengineering-first culture appears sustainable, as we see silicon diversity and overall data-center complexity as poised to only increase looking forward,â he wrote.
The companyâs liquid-cooling offerings are proving more critcial given the heavier power requirements for AI workloads. The companyâs âintegration of liquid cooling with its own power supply development is a competitive advantage,â Rakers said.
âWhile liquid cooling deployments today are a very small contribution, [Super Micro] has noted that it sees about 205 of data center customers expressing interesting in the evolution/need for liquid cooling deployments,â he wrote, and the company could see a 10% to 20% boost to average selling prices for liquid-cooled versus air-cooled systems.
Opinion:Â Why Super Micro is mopping up the floor with the competition
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