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

Core Viewpoint - Super Micro Computer, Inc. (SMCI) is experiencing strong demand for AI servers, but faces challenges related to margin profile and execution risks, leading to an "Underperform" rating with a price target of $34.00 from BofA Securities [1][4]. Group 1: Demand and Growth Potential - BofA Securities notes robust demand for AI servers and racks, with SMCI positioned to grow from both existing and new customers [2]. - Revenue estimates for FY26/27 are above market expectations, indicating potential for further upside in SMCI's performance [2]. Group 2: Competitive Landscape and Margin Pressures - The market for AI servers is highly competitive, with future large deals likely to come at low margins due to aggressive bidding [3]. - SMCI's margins are expected to remain under pressure from overhead costs, expedited costs, and investments in engineering support, which may result in low revenue growth [4]. Group 3: Product Development and Revenue Recognition - SMCI ramped up the GB300 platform in the December quarter (F2Q26), but revenue recognition from a significant $12 billion design win will depend on manufacturing yield and shipment timing [3].