Super Micro Computer (SMCI) Stock: Goldman Sachs Cuts Price Target on Margin Concerns

TLDR

• Goldman Sachs maintained a Sell rating on SMCI and slashed its price target from $34 to $26
• Super Micro’s gross margin is projected at just 7.5% in 2026, down from over 15% in 2022
• The company’s AI server margins are in single digits, roughly half of traditional server margins
• SMCI shares fell 6.8% on Tuesday to $28.06 after missing quarterly earnings expectations
• Analysts remain split with price targets ranging from $26 to $63, reflecting deep disagreement on the stock’s outlook

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Super Micro Computer shares took another hit Tuesday, dropping 6.8% to $28.06 as Goldman Sachs downgraded its outlook on the AI server manufacturer. The investment bank maintained its Sell rating while cutting the price target to $26 from $34.

Super Micro Computer, Inc., SMCI

The move came as SMCI was the second-worst performer in the S&P 500 for the day. Shares closed at $28.36, extending a brutal run that has seen the stock plummet more than 75% from its all-time high of $118.81 in March 2024.

Goldman’s bearish stance centers on one critical issue: shrinking margins. Despite Super Micro’s dominance in AI servers, the company is watching its profit margins evaporate. Gross margin is expected to hit just 7.5% in 2026, according to consensus estimates.

That’s a steep drop from the 15% margins the company enjoyed in 2022. The culprit? AI server margins are in the single digits, about half what traditional servers deliver.

Goldman analysts led by Katherine Murphy blame several factors for the margin squeeze. Competition between vendors is heating up. Suppliers are demanding higher prices. Customer concentration is giving big buyers leverage. And the shift toward standardized AI server designs, particularly Nvidia’s reference designs, is commoditizing the market.

Caught Between Rock and Hard Place

Super Micro finds itself in an uncomfortable position. The company sits between powerful suppliers who can charge high input prices and a handful of large customers with strong negotiating power.

The company is trying to expand beyond its neocloud base into enterprise and sovereign customers through its Data Center Building Blocks software platform. But that strategy requires decades of built-up support operations that Dell Technologies has and Super Micro doesn’t, Goldman noted.

The timing couldn’t be worse. Super Micro just reported quarterly results that missed expectations. The company posted earnings per share of $0.35 versus the $0.46 analysts expected. Revenue came in at $5.02 billion, down 15.5% year-over-year and well short of the $6.48 billion Wall Street anticipated.

Mixed Signals from Wall Street

The stock’s guidance for Q2 fiscal 2026 calls for EPS between $0.46 and $0.54. Management still expects revenue growth of 64% in fiscal 2026, which Goldman actually believes the company can beat through 2028.

That’s the paradox here. Goldman thinks Super Micro will crush revenue expectations for years. The company is the go-to supplier for neoclouds like IREN and CoreWeave, which are building out data centers at breakneck speed with backing from deep-pocketed hyperscalers like Microsoft.

But revenue growth doesn’t matter much if margins stay in the basement. The path back to double-digit margins looks like a slog, Goldman warned.

Wall Street can’t seem to agree on this one. Nine analysts rate SMCI a Buy, while three rate it a Sell. The consensus is a Hold with a $47 price target.

Individual targets tell a different story. Susquehanna sees the stock hitting $15. Northland Securities thinks it could reach $63. Rosenblatt recently cut its target from $60 to $55 but maintains a Buy rating. KGI Securities upgraded the stock to Outperform with a $60 target in November.

Investors are just as divided. More than 17% of Super Micro shares are currently sold short. Trading volume on Tuesday reached 19.3 million shares, below the average of 26.1 million.

The stock now trades with a market cap of $17 billion and a P/E ratio of 22.81. Its 50-day moving average sits at $33.35, while the 200-day average is $43.54. The company maintains a quick ratio of 2.95 and a current ratio of 5.39, with a debt-to-equity ratio of 0.72.

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