Super Micro Computer (SMCI) Week in Review: 11% Stock Drop Despite 123% Growth

"Super Micro Computer ( NASDAQ:SMCI | SMCI Price Prediction) dropped 11.2% this week, closing at $30.54 on Friday. The decline stands out against the broader market's modest pullback. The S&P 500 ( NYSEARCA:SPY) fell 1.3% and the Nasdaq-100 ( NASDAQ:QQQ) dropped 1.3% over the same period. Despite the weekly selloff, SMCI remains up 4.3% year-to-date. Three storylines explain what moved the stock this week."

"CEO Charles Liang raised the full-year revenue target to $40 billion, calling it "conservative". The AI server boom is real. But investors aren't celebrating. Gross margins compressed to 6.3%, a new low. That's the problem. Revenue is exploding, but investors are focusing more on compressing margins in an extremely competitive industry. In late 2023, Super Micro had 15.6%gross margins. They slipped below 10% at the beginning of 2025, and are now below 7%."

"Goldman Sachs ( NYSE:GS) analyst Katherine Murphy turned bearish, citing margin compression, competitive dynamics, and limited bargaining power versus hyperscaler customers. JR Research downgraded the stock to Hold, warning that intensifying competition from Dell and potential Nvidia offerings pose risks. Management believes margins will improve through their Data Center Building Block Solutions expansion. But analysts remain skeptical about timing and magnitude. The market is pricing in doubt."

Super Micro Computer fell 11.2% this week, closing at $30.54, while the S&P 500 and Nasdaq-100 each dropped about 1.3%. Q2 fiscal 2026 revenue reached $12.7 billion, up 123% year-over-year and above estimates, prompting management to raise the full-year revenue target to $40 billion. Gross margins compressed to 6.3%, down from 15.6% in late 2023 and below 7% now, generating investor concern. Analysts cited margin pressure, competitive dynamics, and limited bargaining power with hyperscalers, prompting downgrades or bearish views. Management expects margin improvement through Data Center Building Block Solutions, while insider stock sales added selling pressure.

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