Bank of America analyst warns of 30% potential decline in Super Micro Computer stock due to profit headwinds and supply challenges.

BofA Securities analyst Ruplu Bhattacharya has resumed coverage of Super Micro Computer (SMCI) with an Underperform rating and a $35 price target, implying over 30% downside from current levels. The analyst believes that Super Micro's profit margins could come under pressure due to increased competition and shortages of key parts, as well as ongoing legal issues and weak internal controls. Despite expecting revenue to come in above market forecasts, Bhattacharya remains cautious about profits and sees gross margins falling.

BofA Securities analyst Ruplu Bhattacharya has resumed coverage of Super Micro Computer (SMCI) with an Underperform rating and a $35 price target, implying over 30% downside from current levels. The analyst believes that Super Micro's profit margins could come under pressure due to increased competition and shortages of key parts, as well as ongoing legal issues and weak internal controls. Despite expecting revenue to come in above market forecasts, Bhattacharya remains cautious about profits and sees gross margins falling.

Bhattacharya cited rising competition in the AI server and rack market as a reason for margins staying under pressure. He also noted that limited access to key components like GPUs and liquid cooling systems could restrict revenue growth. Bhattacharya pointed out that rivals Dell Technologies and Hewlett-Packard Enterprise hold an edge with enterprise clients. He added that over time, liquid cooling could become commoditized, narrowing Super Micro’s current manufacturing advantage. As per the analyst, a slowdown in AI spending may also weigh on revenue.

Bhattacharya flagged risks tied to the stock’s volatility, headline sensitivity, customer concentration in accounts receivable, ongoing litigation and investigations, and the potential need for new capital that could dilute shareholders. He also emphasized the importance of management addressing material weaknesses in financial reporting controls.

Bhattacharya’s $35 price target for Super Micro was based on 13x his estimated 2026 EPS of $2.67. Given his projection of 13% compound annual net income growth from fiscal 2024 to 2027, he considered this multiple reasonable. While the 13x multiple exceeded Super Micro’s long-term median of 10x, the analyst justified the premium due to the company’s AI-driven growth.

Despite recognizing Super Micro’s strong AI server revenue growth — comparable to Dell and Hewlett Packard — Bhattacharya sees the company as a “show-me” story, pointing to past volatility and execution risks. He applies a 13x multiple, higher than the 9x median for OEM peers.

For the upcoming fourth quarter, Bhattacharya forecasted revenue of $5.94 billion and adjusted EPS of 73 cents.

References:
[1] https://www.benzinga.com/analyst-stock-ratings/initiation/25/07/46325914/super-micro-remains-a-show-me-story-as-analysts-weigh-ai-growth-against-execution-risks
[2] https://seekingalpha.com/article/4800269-super-micro-computer-is-the-premium-valuation-justified-as-growth-expectations-cool
[3] https://www.marketbeat.com/instant-alerts/filing-capital-advisors-inc-ok-buys-13451-shares-of-super-micro-computer-inc-nasdaqsmci-2025-07-07/