After Plunging More Than 17%, Is Super Micro the First Crack in the AI Bubble?

Super Micro Computer (SMCI.US), one of the world's largest AI server manufacturers—whose stock has skyrocketed 88% year-to-date, significantly outperforming the Nasdaq 100, S&P 500, and even AI chip leader NVIDIA—saw its shares plummet over 17% after slashing its full-year sales forecast and reporting quarterly results and profit guidance that fell short of market expectations.

Wall Street analysts have long viewed Super Micro as a "hot AI computing play," widely expecting the company to benefit from tech giants' multi-billion-dollar investments in hyperscale data centers supporting AI training/inference workloads. The unexpected downward revision by management has disappointed investors, raising doubts about demand for high-performance AI servers, pricing pressures, and intensifying competition in the sector. This could trigger a sharp decline similar to the company's past volatility during audit-related controversies.

Super Micro's surprise guidance cut signals uneven demand for its powerful AI servers as it transitions to new product lines featuring NVIDIA’s (NVDA.US) Blackwell or Blackwell Ultra architecture chips. The company faces fierce competition from rivals like Dell (DELL.US), Hewlett Packard Enterprise (HPE.US), and NVIDIA’s in-house GB200/GHB300 server systems and NVL racks. Notably, Dell recently raised its annual profit forecast, while HPE exceeded Q2 revenue and earnings estimates.

Management now expects fiscal 2026 sales (ending June 2026) to reach at least $33 billion—a stark contrast to February’s bullish $40 billion projection, which was nearly double analysts’ estimates at the time. The abrupt revision triggered heavy selling. Additionally, its Q1 (ending September) operating margin guidance of ~5% badly missed Wall Street’s 10% consensus, highlighting how cutthroat competition is eroding profitability.

Market Share Erosion in AI Servers?

Super Micro’s 88% YTD surge had been fueled by optimism over booming demand for its AI servers and liquid-cooling cluster solutions, particularly from U.S. tech giants. Bloomberg Intelligence data shows analysts expect Google, Microsoft, Meta, and Amazon to collectively spend over $350 billion this year on AI data centers—a 35% YoY jump—with 2026 expenditures exceeding $400 billion.

Yet, the lowered outlook has sparked skepticism about Super Micro’s ability to capitalize on NVIDIA’s Blackwell/Blackwell Ultra chips. Margin pressures stem from clearing older inventory while ramping new Blackwell-based systems and battling for orders in a crowded market. After closing at $57.26, shares tumbled 17% post-market.

Earnings Miss & Weak Guidance

The San Jose-based firm reported Q4 sales of $5.76 billion (+7.5% YoY) and adjusted EPS of $0.41, below consensus estimates of $6.01 billion and $0.44. For Q1, it guided sales of $6.0–$7.0 billion and EPS of $0.40–$0.52, versus analyst expectations of $6.59 billion and $0.59.

CEO Charles Liang acknowledged some clients are delaying orders for current products while awaiting NVIDIA’s next-gen chips, but expressed optimism about improved supply later this fiscal year. DA Davidson’s Gil Luria stated, "Given robust AI server demand, Super Micro’s shortfall clearly reflects share loss to Dell, HPE, or NVIDIA’s own systems."

Is Super Micro the First Crack in the AI Valuation Bubble?

While explosive AI demand, U.S. infrastructure investments, and tech giants’ data center expansions suggest the "AI rally" for NVIDIA and its ecosystem is far from over, Super Micro’s weak results underscore that not all compute-focused firms will deliver stellar growth. Some analysts fear this could be the first sign of a broader reckoning for overheated AI valuations.

Both Dell and Super Micro are racing to produce servers with NVIDIA’s Blackwell B200/GB200 GPUs to meet surging demand from generative AI applications like ChatGPT and Sora. Their deep partnerships with NVIDIA ensure priority access to hardware and CUDA software optimization.