Super Micro Computer’s (SMCI) 10-for-1 Stock Split: Growth Potential Amid Volatility

Super Micro Computer (NASDAQ: SMCI) has experienced significant volatility this year, but its upcoming 10-for-1 stock split could provide a catalyst for renewed investor interest. Over the past two years, SMCI stock surged nearly eightfold, climbing from about $60 per share in September 2022 to roughly $460 today, driven by strong demand for servers from AI-driven data centers. However, the stock faced a pullback earlier this year due to concerns over gross margins, supply chain challenges, and a delayed 10-K filing, following short-seller Hindenburg Research’s allegations of accounting irregularities. As the stock split takes effect on October 1, SMCI shares may attract more attention, particularly from retail investors.

SMCI has outperformed the broader market consistently, delivering returns of 39% in 2021, 87% in 2022, and 246% in 2023. In comparison, the Trefis High Quality (HQ) Portfolio—comprised of less volatile stocks—also outperformed the S&P 500 but with fewer ups and downs. Stock splits often lead to short-term price run-ups, as we saw with Nvidia and Tesla during their respective splits, by making shares more affordable for smaller investors and increasing trading volumes. Super Micro’s stock price will drop from around $460 to approximately $46 post-split, potentially drawing more retail investors. Furthermore, stock splits can signal management’s confidence in the company’s growth prospects, which remains strong in Super Micro’s case.

Super Micro is projected to grow revenue by nearly 90% in fiscal year 2025 to around $28 billion, fueled by ongoing data center expansion as tech companies enhance their AI and computing infrastructure. AI models are becoming more multimodal, requiring greater computing power and driving demand for Super Micro’s customizable, energy-efficient servers. The company also expects 30% of the server racks it ships next year to include premium liquid-cooling systems, a costly yet essential feature in the AI era. With production capacity set to increase—including a new Malaysian facility capable of producing 5,000 server racks per month—Super Micro’s growth outlook is promising, though gross margins have been squeezed due to higher production costs.

At the current price, SMCI trades at about 21x trailing earnings and 13.5x forward earnings, which appears reasonable given its growth potential. While compliance-related issues remain an overhang, there is potential for the stock to more than double, reaching $1,000. However, if challenges persist, a drop to $200 per share is also possible.