Super Micro Computer shares have more room to run thanks to cloud computing giants splurging on data center gear for artificial intelligence, a Wall Street analyst says. SMCI stock has surged in recent months thanks to its exposure to the AI market.
Rosenblatt Securities analyst Hans Mosesmann on Tuesday initiated coverage of SMCI stock with a buy rating and a 12-month price target of 300. That would be a 34% increase from Monday's closing price of 223.66. Also, year to date through Tuesday's close, SMCI stock is up 184%.
On the stock market today, SMCI stock climbed 2.8% to close at 239.78.
The San Jose, Calif.-based server maker, better known as Supermicro, is perfectly positioned to profit from the AI-driven spending trend, Mosesmann said in a note to clients.
AI now accounts for nearly 30% of Supermicro's sales. Meanwhile, sales in that segment are accelerating with increasing visibility out one to two years, Mosesmann said.
SMCI Stock On IBD Tech Leaders List
Supermicro has competitive advantages thanks to innovations like liquid cooling at scale, he said. Further, the cooling technology prevents processors and servers from overheating.
"Liquid cooling at scale has been quite difficult to deploy given the complexity, expense, and reliability concerns (leaks or droplets)," Mosesmann said. "Supermicro's liquid cooling technology, at scale, can increase rack compute power by over 2X (two times), which we see as a disruptive dynamic in a power-constrained data center."
Supermicro also has been investing in hardware-based security features that help protect sensitive data and applications, he said.
Plus, Supermicro has been collaborating with leading AI processor makers like Nvidia and AMD on their server and storage systems.
SMCI stock is on the IBD Tech Leaders stock list.
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