Last week ended on a low note for Super Micro Computer (NASDAQ:SMCI) stock. After a week of impressive growth, the server and storage solutions company experienced a sudden reversal of fortune as shares plunged sharply on Friday. Shaking off any previous momentum, Super Micro Computer stock fell more than 20%.
Since then, things have only gotten worse. While this hasn’t been good for investors who rushed to buy SMCI stock on its way up, it has been excellent for short sellers. Bears recognized the superficial surge characteristic of an over-hyped stock. This insight resulted in them walking away with a cool $1.2 billion in profits.
Does this mean that SMCI stock is destined to keep falling even further? Given how far shares have fallen, that may be the case. Even being related to the red-hot artificial intelligence (AI) market hasn’t helped the stock rebound yet.
The Triumph and Tragedy of Super Micro Computer Stock
When a stock shoots up too much too fast, it’s hard not to notice. And that’s exactly what we’ve just seen from Super Micro Computer stock. Between Jan. 23 and Feb. 15, SMCI stock rose from $436 to over $1,000 per share, a gain of roughly 130%. That looks impressive on paper, but it also raises a question of how long the momentum can continue.
In the case of SMCI, the answer was not for long. After Friday’s plunge, Super Micro Computer stock is down another 8% as of this writing.
As Bloomberg reports, the stock’s recent plunge marks its biggest dip since August 2023 and short sellers are walking away victorious with $1.2 billion. If shares continue trending downward, they could rake in even more profits, too.
Of course, Rosenblatt Securities analyst Hans Mosesmann issued a highly bullish price target of $1,300 today. But even in the face of such a positive endorsement, SMCI stock is still declining.
InvestorPlace contributor Joel Baglole provided insight into SMCI’s price action last week:
“Super Micro Computer’s stock has also gotten supercharged due to its relationship with [Nvidia] and the fact that Nvidia is using Super Micro’s high-efficiency servers. Demand for the servers is so great, that Super Micro Computer pre-announced its earnings in January. The company’s actual print for the final quarter of last year came in much better-than-expected, sending the stock soaring. But at this point, SMCI stock looks in serious danger of a correction.”
Right now, we’re seeing exactly that, as the market comes to terms with the fact that Super Micro Computer stock simply can’t sustain gains of this magnitude. As Baglole notes, this is clearly an over-hyped company that has fallen victim to the fever pitch of AI enthusiasm.
Can SMCI Stock Bounce Back?
Investors hoping that SMCI stock will suddenly surge again and punish the short sellers are in for a rude awakening. While Super Micro Computer will likely continue trading at reasonable levels, don’t expect it to surge back to $1,000-plus price levels. No amount of hype will likely push shares that high, especially as the current correction continues to set in. In my view, Rosenblatt appears to have issued a premature price target. More analysts will likely come out with bearish takes as Super Micro Computer stock continues trending downward.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
