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Goldman says the run is done in the hottest AI play in the market today

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One of the most popular artificial intelligence plays may be nearing the end of its red-hot run, according to Goldman Sachs. Analyst Michael Ng initiated coverage of Super Micro Computer with a neutral rating Monday, saying that while the high-performance server company’s partnerships with Nvidia , Advanced Micro Devices and Intel back the past year’s 825% rally, now the shares look “fairly valued.” SMCI 1Y mountain Super Micro Computer over the last year “SMCI is very well positioned to serve demand from AI CSP’s over the next few years, but serving enterprise AI infrastructure demand in the years after likely will be more competitive, particularly given more enterprise-focused IT hardware suppliers such as DELL and CSCO,” Ng wrote, referencing cloud services providers. Super Micro Computer has grown to nearly $60 billion in market capitalization and is slated to join the S & P 500 later in March. The stock has more than doubled in the first eight weeks of the year, soaring more than 278% in 2024 after climbing 246% in all of 2023. That’s why further upside looks limited. Among his reasons for no more than a neutral opinion, Ng highlighted that Super Micro Computer currently trades in line with Nvidia on a price-to-earnings basis. Beginning next year, he said, he expects revenue growth to slow to 51% from a 61% compound annual growth rate between 2021 and 2024. Ng initiated a price target of $941 on SMCI, implying about 4% upside from Friday’s close. Shares rallied 20% on Monday. — CNBC’s Michael Bloom contributed reporting.

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