Is The Honeymoon Over With SMCI?

by | Apr 26, 2024

SMCI has been a darling for investors in 2024.

The company, known for building high-powered servers using Nvidia (NVDA) hardware, saw its stock soar a staggering 270% from the start of the year to a peak of $1229 on March 8th.

This incredible run-up was fueled by investor enthusiasm for the booming cloud computing and artificial intelligence markets.

But, the fairytale romance may be showing signs of strain.

Since its March peak, SMCI has experienced a period of volatility. Initial sideways trading gave way to a series of lower lows, finally building to a dramatic one-day drop of over 20%.

This single-day mega plunge came after the company broke with its usual tradition of providing preliminary earnings results.

Investors, interpreting this as bad news, sold off their shares in droves… Though trading volume during the sell-off was lower than during the buying frenzy earlier in the year, which may indicate that this was just a “shakeout” of weak hands.

Since the one-day drop, SMCI has been steadily recovering, gaining 26% from its April 22nd low of $671. It has encountered resistance at key levels around $806, which it worked through. Though it is now bumping its head on the $860 level, which could be a sign that some investors are hesitant to jump back in whole-heartedly given the recent volatility and change from SMCI’s usual pre-earnings guidance.

But the wait won’t be long. SMCI is scheduled to report earnings this coming Tuesday, April 30th after the market closes.

This report will be a critical test for the company and may even  have repercussions for other chip and AI-related companies.

Strong earnings, particularly if accompanied by positive forward guidance, could reignite the investor love affair. On the flip side, a disappointing report could trigger another sell-off, raising questions about whether the honeymoon with SMCI is truly over.

— The Prosperity Pub Team

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