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Super Micro Computers, a new addition to the S&P 500, had a tough first day as a member of America’s leading stock index, but the artificial intelligence sweetheart remains a top draw in the eyes of long-term investors. It is.
important facts
Supermicro stock fell more than 6% on Monday, pushing the Silicon Valley data storage server provider to its lowest share price since March 1.
That was the same day S&P Dow Jones Indices announced it would add Supermicro to the S&P 500, erasing the short-term gains associated with the stock’s inclusion in the major index.
Supermicro was S&P’s worst performing company on its first day of trading as a constituent of the benchmark index, suffering losses roughly twice as large as the index’s next-biggest loser, according to FactSet data. .
The decline came amid a strong day for many other technology stocks, with the Nasdaq Composite Index up nearly 1% and other AI stocks such as Alphabet and Palantir each gaining more than 2%.
Contra
Despite Monday’s decline, Supermicro investors have little basis to complain. His 250% year-to-date and 940% 12-month returns for Supermicro easily exceed the returns of any new S&P stock over those periods.
Main background
Stocks typically rise as soon as inclusion in an index such as the S&P is announced, as the S&P suddenly becomes a more attractive target for asset managers looking to grow cash. Supermicro, a formerly relatively modest San Jose-based company that went public in 2007 at about $8 a share, has become a dominant player in data servers needed for central processing and graphics processing. , and has emerged as perhaps the favorite AI stock for investors in recent months. A unit that runs generative AI services such as ChatGPT. Supermicro’s profits and sales have both doubled in the most recent quarter on an annual basis, and its market capitalization has soared from about $4 billion at the end of 2022 to about $55 billion on Monday. Shares of shoe retailer Deckers, which also joined the S&P, rose about 0.1% on Monday, about 1% above its March 1 price.
important quotes
Bank of America analysts led by Rupul Bhattacharyya said in a recent client note that Supermicro “enjoys a competitive advantage in the growing AI server market,” adding that the AI server market has grown significantly over the past year. It is predicted to explode from $39 billion to $200 billion by 2027. U.S. Supermicro’s price target of $1,280 suggests an upside of almost 30%.
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