High-end tech component manufacturer Super Micro Computer (SMCI 7.32%) was a superstar stock for many investors on Tuesday.
As the influential Consumer Electronics Show in Las Vegas kicked off, Super Micro saw a boost not only from that, but from a positive analyst note on other stocks associated with artificial intelligence (AI). This raises the question, however, of whether Super Micro was deserving of the 7%-plus lift its stock price enjoyed as a result.
Buy recommendations and price target lifts boosted AI stocks
The note, from Oppenheimer‘s Rick Schafer, reiterated that company’s buy recommendation on star graphics card maker Nvidia. Schafer also lifted his price target for not only Nvidia, but also for fellow AI-flavored stocks Marvell Technology, Monolithic Power Systems, and Broadcom. The four comprise the analyst’s top AI picks for 2024.
While Super Micro isn’t included in that group, it benefits by association as a supplier for companies pushing AI technology forward.
That’s a good position to be in, particularly considering that AI is still at a relatively early stage of development. Many tech companies large and small are trying to find an edge in the technology that’ll bring in revenue and juice profit, and they need the best hardware and solutions they can find.
Concerns about the capital raising
Toward the end of 2023, Super Micro stock got dinged on the news that it was seeking to raise more than $500 million through a new stock issue. But in the quickly expanding universe that is AI, $500 million is small change compared to how much ambitious companies are spending to build out AI apps and services. The market seems to be realizing that while this is an expensive game, Super Micro could be quite a winner.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom, Marvell Technology, and Super Micro Computer. The Motley Fool has a disclosure policy.