Super Micro Computer (NASDAQ:SMCI) has been one of the hottest names in the AI hardware space due to the surging demand for data center servers. However, the party may have come to an end. SMCI stock is down 14% due to the company announcing fiscal Q3 results that fell well short of expectations.
The results were so dismal that Dell (NYSE:DELL) and NVIDIA (NASDAQ:NVDA) have also been dragged down notably. Investors are now questioning the entire hardware AI narrative and whether or not it is losing steam. Let’s take a look.
The stock fell after Super Micro said that it expects Q3 revenue between $4.5 billion and $4.6 billion. The prior forecast here was $5 billion to $6 billion. Analysts expected $5.38 billion. EPS results also missed expectations by a wide margin, and it was projected at $0.29 to $0.31. The consensus was that EPS would come in around $0.53 to $0.54.
Management blamed “delayed customer platform decisions” that pushed sales into the next quarter, but investors have been dumping the stock since this could mean the entire sector is slowing down.
There are good reasons for caution, especially as GDP growth has turned negative and the labor market remains weak. One more quarter of negative growth would trigger a technical recession. The market is maturing, and with the broader economy being shaky, it’ll be hard for the AI hardware market to remain red-hot.
Dell recently warned that AI server sales are strong, but profitability is under pressure due to high component costs. And the longer tariffs stick around, the worse it is going to be.
