Before You Chase SMCI's SpaceX Rally, Remember This Rocket Has Misfired Before

Supermicro (SMCI) has had a good past few days. SMCI stock surged after the company reported that it now expects gross margins to land between 15% and 17% instead of the previous guidance of 8.2% and 8.4%. Just last month, CEO Charles Liang also pointed to a partnership with SpaceX (SPCX) for an AI data center within a year. These developments seem to suggest improving fundamentals. But once bitten, twice shy. Investors need to look at things from a different lens, as this isn't just another AI infrastructure story.

To begin, Supermicro's revenue guidance hasn't changed, and revenue is expected to land at the lower end of guidance. At the same time, the backlog has increased, suggesting the company is taking orders much faster than it can serve them. If the margins are doubling, it certainly isn't happening because of increasing revenue. So, where is the gross margin improvement coming from? It probably isn't coming from a durable shift in pricing power -- and could therefore reverse just as quickly.

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While Supermicro's $60 billion backlog is attractive, investors may be wrongly associating it with the SpaceX hype. Neither company has confirmed the size of the partnership, so the SpaceX connection is pretty much inferred, driving the bull thesis without much substance behind it. The reason this needs to be looked at carefully is because of Supermicro's history. Two years ago, Hindenburg Research published a short report on the company alleging accounting manipulation, resulting in a delayed annual filing, a U.S. Department of Justice (DOJ) investigation, the resignation of an auditor, and ensuing class-action lawsuits.

Most recently, the firm was accused of illegally exporting chips to China, with three people associated with the company indicted. Considering this history, investors would be much better off waiting for the upcoming earnings report rather than jumping in on SpaceX and margin-improvement hype.

About Supermicro Stock

Supermicro is a technology company that designs and manufactures servers and storage systems for AI data centers, cloud computing, and enterprises. Its product portfolio includes AI servers, GPU platforms, storage systems, and networking solutions. Founded in 1993, the company is headquartered in San Jose, California.