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Super Micro Stock Falls 23%: Falling Knife Or Buying Opportunity?

Core Insights - Super Micro Computer (SMCI) stock has declined nearly 23% in the last five trading sessions, dropping to approximately $45 per share due to a disappointing Q4 2025 earnings report that missed estimates and showed margin contraction [1] - The company has been positioned as a significant player in the AI server market, benefiting from rising demand for its products, particularly in relation to Nvidia's GPU cycle [1] Revenue Growth Challenges - For the most recent quarter, SMCI reported net sales of $5.8 billion, reflecting an 8% year-over-year growth rate, while net income per share decreased to $0.31 from $0.46 in Q4 FY'24 [3] - The company faces increasing competition in the AI server market from larger rivals such as Dell, HPE, and Lenovo, which may threaten SMCI's growth and profitability due to their broader portfolios and stronger supply chains [3] Margin Issues - Gross margins have significantly declined from approximately 17% in Q4 FY'23 to about 9.5% in Q4 FY'25, attributed to price reductions aimed at securing new design wins [4][5] - The shift towards more expensive liquid-cooling systems, essential for AI workloads, has contributed to margin contraction, with competition from other companies also impacting SMCI's early advantages [5] Outlook and Guidance - SMCI has revised its full-year revenue guidance downwards twice, from an initial expectation of 87% growth to just 49%, indicating challenges in accurately assessing demand [7] - The company has consistently missed consensus earnings estimates in recent quarters, suggesting that its growth trajectory may have been overestimated [7] Corporate Governance Concerns - SMCI has faced controversies, including allegations of accounting irregularities and scrutiny from short-sellers, which have raised concerns about its corporate governance [8]