Why Super Micro Computer Stock Skyrocketed This Week
Key Points
Investors responded positively to a report that Nvidia CEO Jensen Huang wants Supermicro to do more to prevent export violations.
Dell's blowout quarterly results spurred valuation gains for Supermicro stock.
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Super Micro Computer (NASDAQ: SMCI) stock moved sharply higher in this week's trading, gaining 37.8% across the stretch. Over the same period, the S&P 500 and the Nasdaq Composite gained 1.8% and 2.6%, respectively.
Supermicro stock got valuation boosts this week in response to news about efforts to curb the sale of banned artificial intelligence (AI) technologies to China. The company's share price then surged higher following Dell's recent quarterly report.
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Investors were comforted by Nvidia-related news
On May 25, Bloomberg published a report stating that Nvidia CEO Jensen Huang had urged Supermicro to increase scrutiny and efforts to prevent servers featuring high-end Nvidia AI chips from being sold into the Chinese market. In March, the U.S. Department of Justice announced that it had filed charges against three people connected to Supermicro for the alleged smuggling of AI chips into China. The accused parties allegedly facilitated the sale of roughly $2.5 billion in banned AI hardware to customers in China.
While Huang's request to Supermicro regarding chips that have been barred from export highlights a challenge facing the server specialist, investors also saw the development as an indication that there is little immediate risk of the business relationship between the companies being terminated. On Thursday, Supermicro announced that it was working with Taiwanese officials to prevent illegal smuggling.
Dell's earnings triggered a rally for Supermicro
After the market closed on May 28, Dell published results for the first quarter of its 2027 fiscal year -- which ended May 1. The company posted non-GAAP (adjusted) earnings of $4.86 per share on sales of $43.84 billion. The performance crushed the average Wall Street analyst estimates, which called for earnings per share of $2.94 and sales of $35.43 billion.
While Dell competes with Supermicro in the AI server space, investors treated the former company's blowout quarter as a strong bullish indicator for the broader industry and bid up Supermicro stock.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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