Super Micro Computer’s stock surged more than 30% on November 19 after appointing a new independent auditor and submitting a compliance plan to Nasdaq. This move addressed two pressing concerns: the departure of its auditor Ernst & Young and a delayed filing for its 10-K report, which could have led to delisting. However, despite this relief, Supermicro’s stock remains 76% below its all-time high.
The server maker is still grappling with concerns over declining gross margins, competition from bigger players like Dell Technologies and Hewlett Packard Enterprise, and allegations of inflated revenues. The Department of Justice is reportedly investigating its business practices.
Investors might find the stock undervalued at 8 times forward earnings but may need to wait for further resolution of accounting and regulatory issues. Instead, they could consider millionaire-maker blue chip AI stocks like Microsoft (MSFT) or Broadcom (AVGO).
Microsoft has delivered a total return of over 900% in the past decade, driven largely by its cloud business growth. The company’s investments in OpenAI have given it a first-mover’s advantage in the generative AI market.
Analysts expect Microsoft’s revenue and earnings to grow at a compound annual growth rate (CAGR) of 14% and 15%, respectively, from fiscal 2024 to fiscal 2027. Its stock is still reasonably valued at 28 times next year’s earnings.
Broadcom has generated a total return of 2,300% over the past decade, driven by its semiconductor business and growing infrastructure software business. Analysts expect Broadcom’s revenue to grow at a CAGR of 15%, with AI chip sales projected to roughly triple in fiscal 2024.
Investors might consider Broadcom’s track record of smart acquisitions and high exposure to the AI market, which could justify its stock price.
Source: https://www.fool.com/investing/2024/11/24/should-you-forget-super-micro-computer-and-buy-the