Why BofA Remains Cautious on Super Micro (SMCI) Even as AI Demand Grows

Super Micro Computer, Inc. (NASDAQ:SMCI) is one of the AI Stocks Analysts Are Watching. On January 22, BofA Securities analyst Ruplu Bhattacharya reiterated an “Underperform” rating with a $34.00 price target. The firm sees robust AI server demand for SMCI, but cautions about margin profile and execution risks limiting upside.

BofA noted that while its revenue estimates for FY26/27 are already above Street expectations, it sees potential for further upside. There is robust demand for AI servers and racks, with SMCI bearing the potential to witness growth from existing and new customers both.

However, the firm also cautioned how the market remains very competitive, and that future large deals may come at low margins amid aggressive bidding. SMCI ramped the GB300 platform in the December quarter (F2Q26), although revenue recognition of the large $12 billion design win announced last year would depend on manufacturing yield and timing of shipments.

Looking ahead, the firm sees margins remaining pressures, and keeps it estimates unchanged.

We see margins remaining pressured by overhead costs, expedite costs, and investments in additional engineering support and services, and so future revenue growth could be low-calorie. Reiterate Underperform. No change to estimates. PO stays at $34 on 15x our C26E EPS estimate of $2.24.

Super Micro Computer, Inc. (NASDAQ:SMCI) designs and manufactures high-performance server and storage solutions for data centers, cloud computing, AI, and edge computing worldwide.

While we acknowledge the risk and potential of SMCI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SMCI and that has 10,000% upside potential, check out our report about this cheapest AI stock.

READ NEXT: 10 AI Stocks on Market Radar and 10 Buzzing AI Stocks Analysts are Watching

Disclosure: None.