The tech-heavy Nasdaq fell 2% yesterday in the midst of Q3 reporting season, even though earnings look generally pretty decent.

It comes as famously bearish hedge fund manager Michael Burry — of The Big Short movie fame — revealed short positions of over $1bn on leading AI lights Nvidia and Palantir.

Nvidia has fallen 5% since close on 3 November, dropping back below its $5trn market cap. Palantir dipped 10%. Both are still nicely up year to date though, by 48% and 152%, respectively. So the sky isn’t quite falling yet.

Tech stock falls 15%

Let’s take a look at Super Micro Computer (NASDAQ: SMCI) to see what happens when a tech growth stock fails to meet lofty expectations. Super Micro designs high-performance servers and storage, and has been a big player in supplying the AI boom.

The company posted first-quarter earnings Tuesday, after US markets closed. The results fell short of analyst forecasts, and traders punished the stock. From close the previous day, we’re looking at a 14% fall at the time of writing.

Short-term panic?

But it’s just one quarter. And I really don’t see any significant bad news. The company spoke of “design win upgrades“, after a major customer requested changes to a high-volume order.

It means about $1.5bn in revenue has been delayed to the current quarter, with CEO Charles Liang saying the slip is “largely caused by the complexity of these new graphics processing unit racks, which require intricate integration, testing, and validation“.

But right now, it doesn’t look like traders have much time for patience.

Sell-off or shake-out?

Looking at other fallers, Arista Networks is down 12% in the sell-off despite just reporting strong Q3 demand for data centre networking. And Advanced Micro Devices has dropped 6% even after beating expectations with record quarterly revenue. It got off comparatively lightly.

OpenAI CEO Sam Altman has previously said “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes“.

Altman expects some people are going to lose a lot of money on AI. And I think so, too. But it’s always like that with a new technology boom — canals, railways, aviation, internet…

I still expect to see some very big winners, even from today’s share prices. But right now a lot of money is being thrown indiscriminately at anything remotely AI. And I see some sort of shake-out as inevitable.

What to do?

In the early days, it’s impossible to tell the difference between a total sell-off and a focused shake-out. In reality, I see a good chance of the former turning into the latter.

I remain convinced that long-term investors should — carefully — consider today’s AI leaders, including Super Micro. Personally, I’m waiting to see what happens next.

The post Is the AI stock bubble really on the verge of bursting? appeared first on The Twelfth Magpie.

However, Foolish investors embrace volatility as it often means being able to acquire shares of quality companies at reduced prices.

Here’s a handful of stocks that are catching the eye of some of Fool.co.uk’s contract writers today!

Adobe

What it does: Adobe is a software company with products that are used in the creative and digital marketing industries.

By Stephen Wright. Shares in Adobe (NASDAQ:ADBE) have fallen almost 25% over the last 12 months. And that’s enough for me to start taking an interest in it. 

Huge margins, strong returns on invested capital, and an ongoing share buyback programme have historically attracted a high price-to-earnings (P/E) multiple. But that’s starting to change.

At a forward P/E ratio of 17, it’s in the kind of territory where I’m starting to take a look at it. Tech isn’t my strongest sector, but there might be enough margin of safety at these prices.

Artificial intelligence (AI) could be either a risk or an opportunity. It might power the company to new heights, or it might give the competition a boost.

I’m not quite sure which I think is the more likely outcome just yet. But I’ve added Adobe to my list of shares to take a closer look at.

Stephen Wright does not own shares in Adobe.

Alphabet

What it does: Alphabet is the parent company of internet search giant Google.

By Ben McPoland. I reckon Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) stock looks attractive after a 22% fall since early February. This leaves it trading at just 18 times forward earnings, which is cheaper than both the wider S&P 500 and ‘Magnificent Seven’ peers.

However, the US Justice Department is trying to dismantle Google’s search dominance by making it sell the Chrome browser. While antitrust lawsuits are an occupational hazard for Big Tech, a forced breakup of the group is still a theoretical possibility and adds risk.

For now though, Alphabet continues to be a money-printing machine. Revenue rose 14% last year to $350bn, while operating profit soared 33% to $112bn.

Search advertising remains the cash cow, but Google Cloud and YouTube exited 2024 at a combined annual revenue run rate of $110bn. Its Waymo robotaxi business is now doing over 200,000 paid rides a week, while Google is making advances in artificial intelligence and quantum computing.

Finally, Alphabet just snapped up cybersecurity group Wiz for a cool $32bn (its largest ever acquisition, assuming regulatory approval).

Alphabet has many avenues of growth left. As such, I think it deserves a place on any investor’s radar.

Ben McPoland has no position in any shares mentioned.

Amazon

What it does: Amazon is a US-based technology company with numerous divisions including e-commerce, cloud computing and artificial intelligence.

By Paul Summers. Despite setting a new all-time high in February, it’s been a rough few weeks for US titan Amazon (NASDAQ: AMZN). The broader tech sector sell-off on fears of a recession has clearly pushed some investors to bank some profit. 

There might be worse to come. Consumer sentiment remains fragile and the company has already warned of weaker Q1 sales and higher spending on its artificial intelligence (AI) infrastructure.

All that said, I just can’t see Amazon’s stock cratering given just how diversified this business has become. It remains utterly dominant in online retail and a market leader in cloud computing. And while the frenzy surrounding AI was always destined to moderate at some point, it would be a brave person to say that this investment theme won’t recover its mojo in time.

If the share price does keep falling, I’ll find it hard to resist buying in.

Paul Summers has no position in Amazon.

ServiceNow

What it does: A cloud-based digital workflow automation platform that helps businesses streamline operations and boost efficiency.

By Zaven Boyrazian. With businesses looking to maximise efficiency and bolster profit margins, ServiceNow (NYSE:NOW) has had little trouble attracting customers. The firm offers a varierty of tools to help automate the digital workflow of businesses. And it’s something that’s proving quite popular with over 8,100 clients now relying on its technology – including 85% of the Fortune 500.

Lately, management has been taking things a step further with aggressive investments into AI-powered upgrades like predictive analysis, natural language processing, and virtual agents. Sadly, that also meant the stock got swept up by the AI hype train, making its valuation far too rich.

ServiceNow is not short on competition who are similarly trying to stay ahead of the curve with their own AI investments. And with the company expanding its reach into customer relationship management (CRM), it’ll soon be facing off against industry titans like Salesforce which have far deeper pockets.

Nevertheless, with recent market volatility causing the stock to fall by a third, the temptation to buy is rising.

Zaven Boyrazian does not own shares in any of the companies mentioned.

Super Micro Computer

What it does: Super Micro Computer supplies IT products, including servers and storage systems, to industries including AI.

By Alan Oscroft. Super Micro Computer (NASDAQ:SMCI) has been hit by the big US stock market sell-off. And more that that, we’re looking at a fall of around 60% over the past 12 months.

But I think we could be approaching the end of the big shakeup that saw the stock boom and bust in 2024. An investigation into allegations regarding accounting practices didn’t help. But management sees no need to restate any previous financials, which helps with confidence.

Suspicions have also been aired about supplying Nvidia-powered servers to Malaysia, from where they could end up in China contrary to US export restrictions.

With this going on, what do I like about Super Micro? In short, it’s forecasts and the forward valuations they imply.

Analysts expect earnings to climb steadily in the next few years. And that could push the forward 2025 price-to-earnings (P/E) ratio of 17 down as low as 10.5 in 2026. That looks cheap.

Alan Oscroft has no position in Super Micro Computer.

The post 5 S&P 500 ‘sell-off stocks’ Fools have added to their watchlist appeared first on The Twelfth Magpie.

Super Micro Computer (NASDQ: SMCI) is a server and data centre hardware company that designs, manufactures, and sells high-performance computing solutions. The company specialises in AI, cloud computing, and enterprise IT infrastructure.

Shares of the stock gained over 50% in February, making it the most successful stock on the index. The wider picture, however, tells a less impressive story — the stock is down 61% over the past year.

So does the recent growth suggest a recovery is on the cards — or is it a sucker’s rally?

Accounting and governance issues

Supermicro suffered significant losses in the second half of 2024 after facing allegations of accounting irregularities. This ultimately led to the resignation of its auditor, Ernst & Young. These issues raised concerns about the company’s financial integrity, contributing to the drop in its stock price.

In early February, shareholders anticipated better-than-expected results for the full year 2024. This helped lead to rapid growth in the first three weeks of the month.

But as the day got closer, fears spread that it might fail to meet the submission deadline. In the end, it successfully filed its delayed financial reports just before Nasdaq’s deadline last Tuesday (25 February 2025). Subsequently, it averted a potential delisting and restored investor confidence, which led to a brief price jump.

The results and the small recovery are promising, but is it enough to save the stock?

Risks to consider

The previous accounting issues and auditor resignation have cast a shadow over the company’s governance practices, which may continue to affect investor confidence. Any more delays – or missed expectations – could hurt the already sensitive share price.

What’s more, the server hardware and data warehousing market is highly competitive. Major players like Dell Technologies and Nvidia present tough competition. Supermicro certainly has its place, but there’s no guarantee it can maintain its market share.

Well-positioned with strong financials

Supermicro holds a dominant position in the server and data centre hardware industry, an in-demand sector with strong growth potential. The increasing demand for AI and cloud computing infrastructure doesn’t look likely to drop off any time soon.

As such, analysts anticipate revenue to increase over 100% in the next two years, nearing $33.2bn by 2026. Earnings per share (EPS) are expected to follow suit, more than doubling from $2.21 to $4.52 by 2027.

Share price forecasts are somewhat more subdued, averaging a moderate 14.2% gain in the coming 12 months. Yet, from a valuation perspective, the stock looks cheap. 

Based on future cash flow estimates, it could be undervalued by as much as 86%. Plus, it has a forward price-to-earnings (P/E) ratio of 14, well below the industry average of 21.8.

The company’s balance sheet looks good, with $6.24bn in equity and $1.91bn in debt. That gives it a debt-to-equity (D/E) ratio of only 0.3.

As a shareholder, the recent results and improved auditing practices are encouraging. But I’m not 100% sold on a full recovery just yet, so I may hold off a bit before buying more shares.

The post Up 50%! This embattled tech giant is leading a US stock market recovery appeared first on The Twelfth Magpie.

Then everything started unravelling for the IT infrastructure company. As I write, the share price has lost 78% of its value in just eight months. Talk about a fall from grace!

However, Rolls-Royce stands as a powerful example of what’s achievable through a successful turnaround. The FTSE 100 engine maker was on the brink of bankruptcy during the pandemic, yet it survived and is now thriving. The stock’s soared 1,300% in four years!

Might such an epic rebound be on the cards for Super Micro stock at some point? Here are my thoughts.

Incredible growth

For those unfamiliar, the company makes hardware for data centres and artificial intelligence (AI) applications. Its energy-efficient servers (often packed with Nvidia‘s chips) have seen incredible demand as the generative AI revolution has exploded globally.

We can see this in Super Micro’s revenue, which more than doubled to $14.9bn last year.

Omnishambles

So why have the wheels come off? The reasons are almost too numerous to list. But starting in August, the firm said it wouldn’t be able to file its audited annual report on time. That’s obviously never a good sign.

Then an explosive report from short seller Hindenburg Research was published. In this, it made a number of serious allegations against Super Micro. The main ones were:

• Accounting manipulation
• Rehiring of top executives who were directly involved in past accounting scandals at the firm
• Significant undisclosed business dealings with companies controlled by the CEO’s family members
• Continuing to do business with Russia, violating US sanctions

Last month, it was reported that the US Department of Justice is in the early stages of investigating the company. Oh, and the Nasdaq is also threatening to delist the stock due to the missing annual report.

And as if all that wasn’t enough, Super Micro recently disclosed that Ernst & Young has resigned as its auditor (after just 17 months).

Should I buy Super Micro stock?

Now, it needs to be stated that Super Micro denies all these allegations. Also, Hindenburg Research is a short seller, which means it borrows shares and sells them, hoping to buy them back later at a lower price after a scathing report (pocketing the difference as profit). So it benefits from the stock’s decline.

Of course, it’s always possible for Super Micro to turn things around. A new auditor and management could stabilise things, while revenue and earnings may well continue to climb higher due to growing AI demand.

Moreover, the stock appears dirt cheap, trading at a mere 7 times forecast earnings for this financial year. So I wouldn’t totally rule out a big share price recovery.

However, I want no part of this. Reports say that Nvidia has started to route orders away from Super Micro due to these alleged accounting issues. If so, that could seriously impact future growth.

Moreover, on announcing its resignation, Ernst & Young said it was “unwilling to be associated with the financial statements prepared by management“. Yikes!

There’s far too much uncertainty here for me. Therefore, I’ll invest elsewhere in November.

The post Down 78%, is this once-hot AI growth stock set to explode like the Rolls-Royce share price? appeared first on The Twelfth Magpie.

Recently however, this stock’s come crashing down. Currently, it can be snapped up for $440 – about 65% below its 52-week high.

Is it time to buy the growth stock for my portfolio? Let’s discuss.

I’ve been watching this stock

I’ve had Super Micro Computer on my watchlist for many years now (well before the AI craze). I actually wrote a bullish article on it back in 2017 when it had a market-cap of just $1.3bn (versus $26bn today). More recently, the stock came back into my focus last year when a director at the company bought $1.1m worth of shares.

I’ve always thought the company looks interesting from an investment perspective. That’s because it specialises in high-performance computer servers and storage systems that are environmentally friendly and save energy. And in today’s digital world, the market for these kinds of products is growing fast.

Meanwhile, Super Micro’s recent growth has been spectacular. Last financial year (ended 30 June), revenue more than doubled to $14.9bn. This financial year, analysts expect the top line to nearly double again to around $28bn.

It’s worth noting however, that the company has had some issues with regulatory authorities in the past. In 2018, for example, it was temporarily delisted from the Nasdaq for failing to file financial statements. Then, in 2020, it was charged by the US Securities and Exchange Commission (SEC) for ‘widespread accounting violations’.

Given these issues, I’ve never invested in the company.

Hindenburg short seller report

Now recently, the stock’s been hit by a short seller report from Hindenburg Research. In the report (released in August), Hindenburg has accused Super Micro of:

• Further accounting manipulation – Hindenburg believes Super Micro has been engaged in ‘improper revenue recognition’ and ‘circumvention of internal accounting controls’

• Questionable disclosed and undisclosed related-party transactions – the report mentions that businesses Ablecom and Compuware, which are controlled by Super Micro CEO Charles Liang’s brothers, have been paid $983m in the last three years

• Sanctions violations – the report notes that Super Micro has violated sanctions rules by exporting products to Russia

Hindenburg also mentions that key customers such as Tesla and Amazon have been moving away from Super Micro and doing business with competitors such as Dell.

All told, we believe Super Micro is a serial recidivist. It benefitted as an early mover but still faces significant accounting, governance and compliance issues and offers an inferior product and service now being eroded away by more credible competition.

Hindenburg Research

Should I buy?

Given the accusations in this report, I won’t be buying Super Micro Computer stock right now.

Short seller reports aren’t always accurate. But I’ve found over the years that where there’s smoke, there’s often fire. What concerns me is that this short interest right now is very high at nearly 20%. This suggests a lot of institutions are betting against the stock today.

Of course, there’s a chance that Super Micro shares could rebound from here. After all, the company is at the heart of the AI revolution, and uses Nvidia‘s graphics processing units (GPUs) for its servers.

Given the level of interest from short sellers, however, I’m going to look at other AI stocks for my portfolio.

The post Down 65%, is Super Micro Computer (SMCI) one of the best AI stocks to buy now? appeared first on The Twelfth Magpie.

It can provide extra funds to pay off debts, save for emergencies, invest for the future, and enjoy more leisure activities. This added financial cushion offers greater security and flexibility, enhancing overall quality of life.

However, many prospective investors will be starting their journey to a second income with nothing at all. And for them, the idea of earning a sizeable second income may seem rather farfetched.

Fear not. Here’s how it can be done.

A time-tested strategy

I’m going to need to start by putting money aside every month. That’s the only way to get going if I don’t have any savings. This could be as little as £20 a month, or £50 a month with larger broker platforms like Hargreaves Lansdown.

However, if I want to make a real difference in the long run, the bigger the better. For the sake of this example, I’m saying £300 a month, which increases by 2% annually.

Next, I’d need to reinvest all my returns year after year. This allows me to benefit from something called compound returns. These returns are truly groundbreaking, allowing our funds to grow exponentially — faster as time goes on.

Take a look at how my money could grow in the chart below.

As we can see in this example, after 20 years, I’d have £259k, assuming an annualised return of 10% (which isn’t guaranteed). This would be a good return for a novice investor, but the best investors can certainly achieve much better.

After 20 years, I could either move towards a dividend-focused portfolio, and perhaps earn around £18,000 annually, or take the 10% annual growth as a second income.

Investing wisely

Of course, this wouldn’t be possible unless we make the right investments. Many novices make the wrong decisions and end up losing money.

Instead, we need a diverse portfolio or well-chosen investments. One stock that I believe can drive returns in excess of 10% annually is Super Micro Computer (NASDAQ:SMCI).

The company’s rackmount servers and graphics processing unit (GPU) servers have made it an essential enabler of the artificial intelligence (AI) revolution.

Its share price has soared, but it appears to have much further to go. The average share price target is $1,066, inferring the stock is currently discounted by 27.6%.

One concern raised by some analysts is that hyperscalers — companies investing vast amounts of money in AI and data centres like Meta — are front-loading their spending, thus making Super Micro’s long-term prospects less exciting.

However, I don’t subscribe to that view. Data centres will demand 20% of the world’s power supply in 2025 and Super Micro, with its proprietary cooling technology, should be in prime position to benefit from long-term trends.

The post No savings? Here’s how I’d turn an empty ISA into a second income worth £18,000 appeared first on The Twelfth Magpie.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

ACI Worldwide

What it does: Develop digital payments software to process credit and debit card transactions with fraud protection.

By Mark David Hartley. ACI Worldwide (NASDAQ: ACIW) may not be a household name yet but it’s more than just another digital payments provider. The Nebraska-based company provides services to a host of well-known local and international clients. Think Co-op, Wendy’s, Westpac and Alipay, among others.

Recent Q1 earnings results revealed a 208% increase in operating cash flow and 93% increase in adjusted EBITDA. However, revenue growth was weak at only 9% and although net income improved, it still came in at a $8m loss. Overall, CEO Thomas Warsop said the results “exceeded expectations.”

It still carries a high level of debt ($1.03bn), with a debt-to-equity (D/E) ratio of 82.3%. That’s a risk if it increases but with earnings forecast to grow, I don’t expect that to happen. In the long term, I think the company has the potential to become a major player in the digital payments arena.

Mark David Hartley owns shares in ACI Worldwide.

Alphabet

What it does: Alphabet is one of the world’s most famous big tech companies, now invested heavily in AI.

By Oliver Rodzianko. In my opinion, Alphabet (NASDAQ:GOOGL) is one of the best investments on the US stock market right now. As such, it’s currently the second-largest holding in my portfolio.

It is incredibly rare for a big tech company to be trading below what it’s worth based on future earnings and cash flow generation. However, in this instance, I think the shares are roughly 10% undervalued based on my advanced models.

To understand the opportunity here more concretely, I compared the investment to Microsoft, which has a price-to-earnings ratio of around 38. Alphabet’s ratio is just 27.

Both are big competitors in the AI arms race. Therefore, Alphabet needs to be careful that Microsoft-backed ChatGPT doesn’t outdo Google’s Gemini.

However, I’m betting Alphabet will continue to be an AI leader over the long term. That’s why I’ll be doubling down on my investment in the company again soon.

Oliver Rodzianko owns shares in Alphabet.

Shopify

What it does: Shopify is a cloud-based e-commerce platform powering millions of online stores worldwide.

By Zaven Boyrazian. Shopify (NYSE:SHOP) has evolved drastically over the last decade. What started out as a simple e-commerce website builder has evolved into a full-stack business ecosystem. The platform handles online checkout, customer analytics, marketing, payment processing, business financing, and even logistics.

As a result, merchants using the Shopify platform are now responsible for approximately 10% of all online transactions in the US. And despite what the volatile share price might suggest, the company is still growing at a double-digit pace, consistently beating analyst expectations. Not to mention that profit and free cash flow margins are also expanding.

The stock does trade at a lofty multiple. So, seeing volatility in the share price isn’t a major surprise. Nor is it the only risk investors have to consider. Worsening economic conditions have created hurdles in the short term. And the firm still has plenty of rivals to compete with like Amazon.

Yet, with explosive long-term potential, these risks may be worth taking, in my opinion.

Zaven Boyrazian owns shares in Shopify.

Super Micro Computer

What it does: The company provides computer hardware such as servers optimised for AI workloads. 

 By Dr James Fox. Super Micro Computer (NASDAQ:SMCI) stock is up 1,000% over 18 months, but that doesn’t mean it’s overvalued. 

The company, which makes hardware solutions, is one of the beneficiaries of the AI revolution. More than 50% of the company’s revenues now come from AI and data centres. 

Super Micro’s innovation and first-to-market approach have seen its share of this lucrative and fast-growing market surge, reaching 8.4% in the last quarter. 

While there may be bigger players in the segment, Super Micro’s open architecture and proprietary liquid cooling systems optimise server performance, and this is vital for demanding AI workloads. 

One concern, as suggested by a handful of analysts, is that hyperscalers are frontloading their CAPEX on data centres and AI, inferring that the current demand is just a spike. 

However, I do subscribe to that forecast. The consensus suggests that earnings will continue to grow by around 40% annually throughout the medium term, leading to a price-to-earnings-to-growth ratio of 0.73. 

James Fox owns shares in Super Micro Computer. 

TransMedics Group

What it does: TransMedics Group is a medical technology company that provides hospitals with its organ care system (OCS).

By Muhammad Cheema. If I had to put all my money into one stock it would be TransMedics (NASDAQ:TMDX).

This is because of how transformative its OCS system has been in the organ transplantation process. It keeps organs fresh for longer and has started taking over the whole process from organ retrieval to transportation. Transplant centers can therefore focus on patient care.

And the company’s results prove how successful it’s been. Quarterly revenue is growing insanely fast, recently rising by 133%. It also became profitable for the first time.

In terms of risks, the company is yet to make a profit on an annual basis. Furthermore, as TransMedics puts more emphasis on the logistics of the process, some focus could be taken away from producing innovative medical technology.

However, I only expect the company to keep growing as organ transplantation is a huge issue. Unfortunately, over 100,000 people in the US are currently waiting for a transplant. Ultimately, TransMedics’ process could help to bring this number now.

Muhammad Cheema owns shares in TransMedics.

The post Best US stocks to buy in July appeared first on The Twelfth Magpie.

S&P 500 newcomer

Super Micro Computer (NASDAQ:SMCI) is among the biggest winners of the AI boom, benefiting significantly from the surging demand for high-performance computing infrastructure. The stock’s up over 1,000% in 18 months and recently entered the S&P 500.

Simply, the company designs and manufactures high-performance computer servers and storage systems. These products are used in data centres, cloud computing, and AI applications to handle large amounts of data quickly and efficiently.

Super Micro has also benefitted from partnerships with AI kingpin Nvidia. The companies have actually had a partnership for three decades, with Super Micro designing its servers to get the most out of Nvidia-designed chips.

The recent pullback in the share price could represent an opportunity for eagle-eyed investors to grab a chunk of this AI winner.

At $770 per share, it’s trading at a considerable discount to the average share price target, which currently sits at $1,097. That’s a 42.7% discount.

The data backs up this discount. Super Micro is trading with a forward price-to-earnings (P/E) ratio of 32.4 times, and a price-to-earnings-to-growth (PEG) ratio of 0.69. This PEG ratio infers a significant undervaluation.

The biggest risk is that these forecasts aren’t met. Super Micro is leading the industry, but it’s a fast-moving sector and competition could come from several angles. In turn, this would impact future earnings.

Small-cap winner

Sterling Infrastructure (NASDAQ:STRL) is a small-cap winner from the AI/data centre revolution, capitalising on the rapid expansion of digital infrastructure. The stock’s up 125.5% over 12 months, but recently pulled back from highs around $130 a share.

As the demand for data processing and storage surges due to advancements in AI, cloud computing, and big data, Sterling Infrastructure has positioned itself to benefit from these trends.

While Sterling engages in a wide range of construction projects, from new roads to parking structures, data centres now represent 40% of the company’s significant backlog.

As of 31 March, management said the $2.42bn backlog equated to 16 months of revenue.

From a value perspective, the stock’s currently trading around 15% below its share price target and has a P/E ratio around 21 times. To me, this looks pretty attractive, given its growth prospects.

As with Super Micro, the only concern is that forecasts aren’t met. Some analysts have argued that the huge spending we’re currently seeing on AI chips and data centres is front-loading, and that demand will be more modest from 2025 onwards.

Nonetheless, there’s little sign that the sector’s slowing. And with a backlog equating to 16 months of revenue, Sterling has a solid foundation to sustain its growth momentum and great visibility on future earnings.

The post These banging growth stocks just went on sale! appeared first on The Twelfth Magpie.

What makes it special?

Super Micro is a provider of Total IT solutions, specialising in server and storage. These are playing a pivotal role in powering the infrastructure that drives machine learning algorithms and deep learning models — artificial intelligence (AI).

The San Jose-based firm also has proprietary cooling technology that allows the latest high-power chipsets to work at maximum efficiency. These super-computer services are also integral to our increasing demand of cloud storage. Super Micro’s clients include Amazon, Alibaba, Google and Microsoft. 

Attractive valuation

When I started investing I was certainly naive in that I mistrusted companies with expensive price-to-earnings (P/E) ratios. I often failed to dive deeper into a company’s growth prospects.

Sometimes these stocks are simply overvalued — that’s how I feel about companies like Arm Holdings and Tesla right now — but sometimes we can find pockets of value in parts of the market that look expensive on first glance. 

Super Micro’s one of these stocks. Expensive at first glance, but good value on further inspection. The firm trades at 66.9 times earnings from the trailing 12 months (TTM) and 43.2 times forward earnings. Of course, that sounds expensive, especially for UK-focused investors who may be used to much lower P/Es. 

Moving forward however, Super Micro’s P/E’s expected to fall substantially to 31 times in 2025, and 26.6 times in 2026. Moreover, using analysts’ earnings forecasts, we can arrive at a price-to-earnings-to-growth (PEG) ratio of 0.86. 

Normally, fair value’s indicated by a PEG ratio of one, and anything under this is typically considered undervalued. In this current (rather expensive) US market, Super Micro stands out as exceptional value. 

The bottom line

There’s a caveat to the above. And it’s that forward earnings metrics are based on estimates. Analysts’ estimates are really useful, but they can be wrong.

It’s also the case that forecasts become less accurate as we look further into the future. That does mean buying a stock based on where we expect it to be in five years can be very risky.

Likewise, it’s also the case that Super Micro’s dominant position in this sector could be eroded over time. It’s a fast-moving sector and it’s hard to forecast exactly what’s going to happen.

However, I remain bullish on Super Micro, and believe the valuation metrics, combined with the company’s track record of beating estimates, could make it the S&P 500’s top performer in Q2 as well.

The post The stock market’s best performer could deliver again! appeared first on The Twelfth Magpie.

This doesn’t tend to be things like “buy Apple shares”, but broad investing advice that helps us make better decisions for our financial futures.

So, what did he say this time?

Committed to stocks

Buffett, who has a net worth in excess of $125bn, reiterated just how committed he is to investing in stocks with this statement: “I can’t remember a period since March 11, 1942 (…) that I have not had a majority of my net worth in equities.”

That’s might sound obvious for a guy with a net worth $125bn. It’s not like he could have most of his net worth in his home, as most Britons do. But it’s also interesting that he’s been this way for over 70 years.

He’s also been mostly in stocks, not cash, not debt. He believes companies are the best way to continue building wealth.

So, why do I think this is so important for UK investors? Well, most of us have more than half of our net worth in our homes. And I get it. Housing is expensive in the UK.

While there’s an acute shortage of housing in the UK, in the long run I can’t see house prices increasing significantly above country’s growth rate — which is slow.

Yes, it can be better to pay a mortgage than to ‘waste’ money on rent, but we’ve also got to consider the opportunity cost of not having our money invested.

For instance, around half of my net wealth recently went into a house purchase. But my portfolio is up 25% over the last four months. I would have missed out on all that wealth generation — equivalent to half my take home salary — if I tried to minimise my mortgage and maximise equity in my home.

One stock I’m committed to

One stock I’m committed to is Super Micro Computer (NASDAQ:SMCI). The company essentially provides server systems — super powerful computers — that have the capacity to process thousands of computations at once.

Super Micro has ancillary offerings, but its server and storage business has really sent earnings into overdrive. By stacking Nvidia‘s AI-enabling chipsets and using its proprietary cooling technology, Super Micro is providing the processing capacity needed for the generative AI-revolution.

The thing is, while Super Micro stock is up 760% over 12 months, we’re just at the start of the revolution in AI, and with its first-to-market strategy, the San Jose-based firm looks set to benefit from a multi-year windfall.

I absolutely understand that there are very high expectations on Super Micro after three successive earnings beats and the share price surging. And if it does fail to deliver in one quarter, the stock could recoil.

However, with a price-to-earnings-to-growth ratio of 0.8 and a dominant position in a surging industry, Super Micro is a stock I’m committed to.

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