High-flyer Super Micro shares hit record, then sinks 20%

Tech Stock: The US based technology firm Super Micro Computer Inc's shares ended lower by 20 per cent after hitting a record high earlier in the day as investors took a break after betting on the stock as a big beneficiary of strong artificial intelligence (AI) technology demand.

After hitting a new record high of $1,077.87 early in Friday's session, SMCI ended the day down $200 at $803.32, snapping a nine-day winning streak for SMCI and marking its biggest one-day percentage decline since August.

With about 33.5 million shares in the company changing hands on Friday, this marked its busiest trading day since its initial public offering in 2007, according data from LSEG.

In comparison the Philadelphia semiconductor index .SOX fell 0.7 per cent on Friday, trimming its year-to-date gains to around 8%. Even after Friday's decline, SMCI was still more than 182 per cent above its 2023 closing price of $284.26.

Wells Fargo analyst Aaron Rakers started covering the stock on Friday with a price target of $960 and an 'equal weight' rating, saying that investors were already discounting "solid upside" in the stock.

"SMCI's AI-fueled fundamental momentum, underpinned by engineering-first differentiation, has been nothing less than remarkable and should support some sustainable valuation re-rate," said Rakers in a research note.

The median price target for the stock is $635.29, according to the latest data from LSEG. This is more than 20 per cent below Friday's close but compares with the $390 median target on January 16.

On Thursday SMCI jumped 14 per cent after BofA Global Research had started coverage with a buy rating and a $1,040 price target, which is the highest among the 13 Wall Street analysts covering the company, per LSEG data.

BofA said SMCI had established itself as an early launch partner for the likes of Nvidia NVDA.O, which is seen as the leading AI chip maker, Advanced Micro Devices AMD.O and Intel INTC.O for central processing units (CPUs) and graphic processor unit (GPU) accelerators.

Meanwhile, the stock's strong rally over the past month has triggered extremely bearish warning signals from a technicals perspective.