Super Micro Computer (SMCI) shares faced renewed selling pressure on Monday after Goldman Sachs analyst Michael Ng downgraded the stock to “Sell” and slashed his price target to $32. The new target signals a 23% downside from current levels, compounding the 18% decline SMCI has suffered over the past month.
⚠️ Why Is Goldman Bearish on SMCI?
Ng warned that increasing competition from OEMs and ODMs is eroding Supermicro’s market share. Rivals’ aggressive R&D investments are making their products less differentiated from SMCI’s, which could limit the company’s pricing power and squeeze profitability.
Ng also expressed doubts about Supermicro’s ambitious $40 billion revenue target for fiscal 2026, suggesting that rising competition could make this goal unattainable.
📉 Gross Margin and EPS Concerns
Goldman Sachs forecasts shrinking gross margins for Supermicro in the coming years:
- 2025: Margins expected to decline to 12.2%.
- 2026: Further contraction to 11.7%.
Ng also lowered his EPS estimates, arguing that continued investments in new features will weigh on profitability. He advised investors to sell SMCI into strength, warning of further downside ahead.
💰 Valuation Worries
Ng flagged SMCI’s current valuation as unfavorable, noting that the stock trades at 16 times its estimated 2025 earnings. He believes this multiple presents a poor risk-reward profile, especially amid rising competition and margin pressure.
🔍 Goldman’s View Diverges From Consensus
While Goldman Sachs took a bearish stance, other analysts remain more optimistic. The broader consensus on SMCI is still “Moderate Buy”, with most analysts expecting upside potential.
Despite near-term headwinds, Supermicro’s strong AI-driven growth continues to attract bullish sentiment from several market watchers. However, Goldman’s cautious outlook highlights lingering risks from competition and margin compression, creating divergent opinions on SMCI’s future trajectory.
