Down Nearly 50% From Its High, Is Super Micro Computer Stock a Bargain Buy?

Super Micro Computer (NASDAQ: SMCI), which also goes by just Supermicro, has been a polarizing stock to own over the years. It has been generating strong sales growth due to robust demand for its servers, which tech companies have been loading up on as they invest heavily in artificial intelligence. But with concerns about margins and question marks about its governance and leadership, it hasn't exactly been a hot stock to own; it's down 18% over the past 12 months.

Trading around $34 on Tuesday, the stock is down significantly from its 52-week high of $62.36, set last year, and its valuation looks low relative to earnings. Is it a steal at its current price, or are you better off avoiding the troubled tech stock?

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Supermicro's growth is impressive, but its margins are not

In its most recent quarter, which covered the first three months of the year, Supermicro's net sales totaled $10.2 billion, which was more than double the $4.6 billion it reported a year ago. That kind of growth would normally send a stock soaring, but that hasn't been the case with Supermicro.

The problem with Supermicro is that although it's generating strong top-line growth, with poor margins, there isn't much room for error.

SMCI Gross Profit Margin (Quarterly) data by YCharts

In its most recent fiscal year (which ended June 30, 2025), the company's revenue rose by 47% to nearly $22 billion, but its net income actually declined by 9%, to just over $1 billion. The company effectively needs to grow at a fast pace and keep its overhead and operating expenses under control in order to generate significant growth on the bottom line.

The stock may look cheap, but it's not worth buying

Supermicro stock trades at 11 times its estimated future earnings (based on analyst estimates). It's a cheap-looking valuation, but investors have long valued the stock at a discount due to its risk. Its auditor quit the company back in 2024, raising concerns about its controls and procedures. Earlier this year, multiple people connected to Supermicro, including its co-founder Yih-Shyan Liaw, were charged with violating U.S. export laws and sending Nvidia chips to China.

There are simply many reasons to avoid the stock. Between question marks about its governance, low margins, and dependence on continually high investments in the tech sector, the stock is full of risk, which is why it trades at a discount; it's not the bargain it appears to be. There are far better options out there for tech investors.

David Jagielski, CPA 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.