Why Super Micro Computer Rallied Today
Key Points
Cisco added Super Micro liquid-cooled servers to its Secure AI Factory product portfolio.
The stamp of approval helped mitigate corporate governance concerns surrounding Super Micro that came about yesterday and over the past two years.
Super Micro could be the "cheapest" way to play the AI boom, albeit with some risk.
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Shares of AI server-maker Super Micro Computer (NASDAQ: SMCI) rallied 9.4% on Tuesday. The company received a big boost in confidence as enterprise data center infrastructure giant Cisco (NASDAQ: CSCO) announced it would partner with the server maker on liquid-cooled, rack-scale AI solutions.
That validation is especially valuable for Super Micro, which has long been at the forefront of server technology but has more recently garnered skepticism over corporate governance issues.
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Cisco gives a super stamp of approval
It should be noted that today's big jump clawed back the significant decline in Super Micro's stock yesterday. On top of Monday being a tough day for the overall AI semiconductor sector, Super Micro's stock fell especially hard after Taiwanese Authorities indicted two Super Micro employees for attempting to redirect Super Micro AI servers to China, in violation of U.S. export restrictions. Super Micro employees weren't the only ones involved; the indictments targeted nine individuals, including one Nvidia (NASDAQ: NVDA) employee.
The recent indictments follow accusations that Super Micro has been playing fast and loose on other issues, including accounting compliance and corporate governance, since mid-2024.
Super Micro appears to have put most issues behind it, having secured a new auditor who signed off on its books in 2025. Furthermore, Super Micro noted that it was not a defendant in the recent server-smuggling scheme and that it has been working with authorities to help stop third-party smuggling.
Nevertheless, the "smoke" from all these issues appears to have made many investors cautious about Super Micro shares, which trade at a big discount to peers despite a recent massive earnings beat and strong forward guidance.
That's perhaps why Cisco's "seal of approval," so to speak, carries so much weight today. According to today's press release, Cisco is adding Super Micro's liquid-cooled Nvidia AI racks to its Secure AI Factory architecture portfolio, an approved list of AI solutions built with Cisco's secure compliance approval.
Cisco is a giant, longtime infrastructure provider to the biggest enterprises in the world, so its adding Super Micro liquid-cooled racks to its approved product list carries a lot of weight in validating Super Micro's technology, time-to-market execution, and compliance bona fides.
Image source: Getty Images.
Super Micro remains a cheap way to play AI growth
Super Micro trades at a massive discount to peers such as Dell Technologies (NYSE: DELL), despite both being AI server producers and each having similar growth profiles.
SMCI PE Ratio (Forward) data by YCharts
No doubt, concerns over Super Micro's governance play a large role in this yawning discount; however, today's announcement shows Super Micro remains a go-to hardware provider for the biggest companies in AI infrastructure. If you feel comfortable that the corporate governance concerns are overblown, the stock looks like a massive bargain and the cheapest way to play the AI boom -- of course, that's a big "if."
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Billy Duberstein and/or his clients have positions in Super Micro Computer. The Motley Fool has positions in and recommends Cisco Systems and Nvidia. The Motley Fool has a disclosure policy.
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