JPMorgan Downgrades Super Micro Computer

Investing.com — JPMorgan downgraded Super Micro Computer (NASDAQ: SMCI) to Underweight from Neutral on Wednesday, revising the price target to $23 from $50 due to increased uncertainty surrounding the company's business fundamentals and financial reporting practices.

JPMorgan analysts highlighted several key concerns driving the downgrade, particularly transparency issues. They noted, "The company refrained from providing further transparency around the issues leading to the disagreement with the prior auditor (E&Y), despite reaffirming the opinion of the Special Committee that the Audit committee acted independently. There is no evidence of fraud or misconduct."

Additionally, the lack of commitment to leadership changes from management is seen as a negative factor, especially with the delay in appointing a new auditor. This delay could prolong the company's noncompliance with SEC filings.

Regarding business fundamentals, JPMorgan believes demand for Super Micro's current generation Hopper-based servers has slowed, with customers waiting for next-generation Blackwell-based products. This lull in demand may force the company to reduce prices, exerting pressure on its margins in a highly competitive industry.

JPMorgan further expressed concerns over Super Micro's $5 billion of inventory on the balance sheet, as this could amplify pricing risks amid moderating demand. The company may struggle to maintain gross margins within its long-term target range of 14-17% due to delays in next-generation GPU products potentially impacting its leadership in AI server capabilities.

Moreover, JPMorgan anticipates that Super Micro may lose market share to other server providers, particularly in the enterprise segment. As a result, the investment bank has lowered its revenue growth expectations and now applies a 7x P/E multiple to its 2026 earnings forecast for Super Micro, reflecting what it sees as greater financial uncertainty ahead.