JPMorgan says this tech stock that has tripled this year can keep going as it helps lead the AI revolution

Published Mon, Mar 25 20249:30 AM EDTUpdated Mon, Mar 25 202412:38 PM EDT

Super Micro Computer's red-hot run should continue as it powers the artificial intelligence revolution sweeping Wall Street, according to JPMorgan. Analyst Samik Chatterjee initiated coverage of Super Micro Computer with an overweight rating as the company leads the AI compute market "still in its infancy." Compute, or compute power, often refers to the hardware and software such as chips necessary in building AI models. SMCI 1Y mountain Super Micro shares over the last year "We expect the leadership to continue, led by a balance of custom built solutions and fast time to market, although potential upside is more likely from rapid expansion in the AI Server market rather than expansion of the already premium valuation multiple," he wrote in a Monday note. The California-based company is responsible for making server and storage solutions that incorporate graphics processing units that power large language models and AI tasks. It also creates liquid cooling racks that cool AI servers and reduce energy costs in the power-hungry industry. Some customers include some of the biggest chipmakers in the industry such as Nvidia and AMD. The firm expects large hyperscalers and cloud service providers to continue ramping up demand for training and inferencing language models, benefiting Super Micro over the long haul. Inference refers to using the model to make predictions and computations. Fueled by excitement for all things AI, Super Micro has already rallied 242% this year and 778% over the past year, and JPMorgan sees more upside in store. Chatterjee placed a $1,150 price target on the maker of server and storage systems, which implies about 18% upside from Friday's close. Supporting the target and a next-twelve-months earnings per share multiple of 36 times is an expectation for rapid growth and earnings upside within the AI server market. SMCI YTD mountain Super Micro shares year to date Driving ongoing upside is an expectation for rapid growth in the server market. Chatterjee forecasts 43% revenue growth at a compounded annual growth rate between 2023 and 2027. This suggests that Super Micro will conservatively gain 10% to 15% of the AI server market. "Super Micro has essentially similar exposures to hyperscale data center and enterprise customers, key demand drivers of AI related compute deployments, setting it up for strong revenue growth," he wrote.