TLDR:
- Super Micro Computer shares surged 40% this week, reaching their highest level since February
- SMCI announced a $20 billion partnership with Saudi Arabian data center company DataVolt
- Raymond James named Supermicro a “market leader in AI-optimized infrastructure”
- The stock broke out above a falling wedge pattern on high trading volume
- SMCI is recovering from accounting issues that nearly led to a Nasdaq delisting
Super Micro Computer shares have rocketed upward this week, gaining a massive 40% in just a few trading sessions. The server maker’s stock closed at $45 on Wednesday after jumping 16% for the second straight day.
This dramatic price action comes after months of volatility for SMCI. The stock has been on a wild ride following accounting troubles that almost resulted in delisting from the Nasdaq.
Despite these challenges, Supermicro shares have climbed nearly 50% since the start of the year. Even more impressively, they’ve rebounded 63% from their April low.
The most powerful catalyst driving this week’s surge is a newly announced $20 billion multi-year partnership with Saudi data center giant DataVolt. This deal was revealed late Tuesday.
The partnership aims to accelerate the deployment of GPU platforms and rack systems across hyperscale campuses in the region. It represents a major expansion of Supermicro’s global footprint.
Impressive Technical Breakout
From a technical analysis perspective, Supermicro shares staged a decisive breakout above the upper trendline of a falling wedge pattern on Tuesday. The stock then accelerated above its 200-day moving average in Wednesday’s session.
Wednesday’s jump occurred on the highest trading volume since late February. This indicates strong buying conviction from larger market participants.
The relative strength index confirms bullish price momentum. However, it’s approaching overbought levels, which suggests the possibility of short-term pullbacks.
Traders are watching the psychological $50 level as the first overhead resistance area. This coincides with last August’s swing low and the upper range of an October consolidation period.
If the stock can close above $50, the next target would be around $63. This area matches the August countertrend high and prominent February peak.
For potential retracements, the $35 level serves as initial support. This aligns with Monday’s breakout point and corresponds to price action stretching back to last October.
Lower support sits around $26, near the early-February swing low. This could provide opportunities for longer-term investors.
Analyst Enthusiasm Adds Fuel
Wall Street’s growing enthusiasm has added more fuel to the rally. Raymond James recently initiated coverage with an Outperform rating and a $41 price target.
The analyst firm called Supermicro a “market leader in AI-optimized infrastructure” with pricing power that compares favorably to peers.
Adding to the bullish case, Supermicro revealed it had begun shipping high-density servers powered by AMD’s latest EPYC 4005 chips. This enhances the company’s AI hardware story.
The Saudi deal was announced as President Donald Trump began a four-day trip to the Middle East. Supermicro wasn’t alone in securing partnerships, as Nvidia and AMD also announced deals with firms in the kingdom.
Short interest in SMCI remains high at 21%, suggesting this recent run-up could partly reflect a short squeeze. The stock is still down more than 50% from its 52-week high.
While the company maintains its accounting issues are resolved, auditor BDO issued an adverse opinion on internal controls as of June 2024.
Looking ahead, investors should watch whether this breakout has staying power or if profit-taking emerges at key resistance levels.
The $20 billion Saudi partnership represents a long-term opportunity that could reshape Supermicro’s business trajectory. It also validates the company’s positioning in the competitive AI infrastructure market.
