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Super Micro Computer (NASDAQ:SMCI) was added as a new long idea by Hedgeye analyst Felix Wang due to the company's role in the artificial intelligence revolution.
Shares finished up more than 7% on Tuesday and have more than tripled year to date.
"Super Micro's biggest power-up is its close collaboration with Nvidia (NVDA), specifically to build AI GPU-based servers," Wang said.
Nvidia also rose more than 7% to finish the session above the $900 per share level.
The San Jose-based Super Micro was on a tear before the rapid rise of AI as its revenue has increased at an average rate of about 42% over the past two years.
"We like scenarios where there is too much demand chasing too little supply," Wang added. "That's ongoing with AI servers, and SMCI is a growing superpower in the server world."
The accelerating demand for AI has called for more complex datacenter infrastructure, which is a strength for Super Micro, Hedgeye found.
"SMCI has been much more efficient than its peers by focusing on the next steps of engineering, executing on its customization approach (aka building block) and by having a major time-to-market advantage," Wang wrote.
Hedgeye expects Super Micro's earnings per share will hit $35 for fiscal year 2025 and $58 per share for fiscal year 2027. They also see shares increasing 25% this year and 45% over the next two years.
Super Micro has a HOLD rating from Seeking Alpha analysts, but a BUY rating from Wall Street analysts. Seeking Alpha's quant system, which regularly beats the market, rates it a STRONG BUY.
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