Supermicro Makes the Big Leagues: S&P 500 Inclusion Validates Growth Trajectory

This has garnered increasing attention from investors and pushed its stock price to more than $1,068 per share, an increase of more than 274% since January 2024, earning them a coveted position in the S&P 500 today. Let’s delve into Supermicro’s potential and how you can seize this opportunity.

A Tech Titan Powering the Future Poised to Capitalize on the AI Boom

Supermicro‘s reach extends beyond traditional data centers. Their technology empowers cloud and virtualization environments with solutions for virtualized workloads. They also aim to provide the next generation of connected devices and edge computing with 5G solutions, and cater to large-scale data centers with efficient hyperscale infrastructure. This comprehensive approach positions them as a key player in shaping the data-driven future, particularly with the rise of AI.

The AI Boom: A Perfect Match for Supermicro

The AI market has been recently booming for several reasons. First, the demand for AI applications is rising quickly across industries as companies discover the potential of AI to automate tasks, improve decision-making, and personalize experiences. Second, the amount of data generated globally is rapidly increasing , providing readily available data that fuels the development and training of increasingly complex AI models. Finally, the rise of cloud computing provides an affordable platform for developing and deploying AI applications, further accelerating market growth.

Supermicro’s products’ ability to handle massive datasets positions them to capitalize on this booming market. Their technology is the foundation for processing the data that drives AI advancements.

Based on Statista’s projections, the AI market size is expected to reach US$305.90 billion this year and is poised to benefit from an annual growth rate of 15.83%, reaching a market volume of US$738.80 billion by 2030. Generative AI emerges as one of the most promising categories of AI products. According to Bloomberg Intelligence in June 2023, the Generative AI market could potentially grow to $1.3 trillion by 2032 from a market size of $40 billion in 2022, demonstrating a remarkable compound annual growth rate (CAGR) of 42% over the next decade.

Supermicro’s S&P 500 Inclusion: A Testament to Innovation

Supermicro (SMCI) will be part of the well-known S&P 500 index today. Joining the S&P 500 is a significant achievement that highlights Supermicro’s status among top American companies. This recognition can draw more attention from investors, analysts, and the media to the company.

Being in the S&P 500 may also lead to more trading of SMCI stock, making it easier to buy and sell shares with potentially lower costs. This increased trading activity can also improve Supermicro’s ability to raise funds in the future through stock offerings.

It also enhances the company’s reputation as a leading technology innovator, which can help attract and retain top talent and boost company’s development in the future. It also allows Supermicro to directly compare its performance with other prominent companies in the index, providing valuable insights for improvement. Overall, joining the S&P 500 can strengthen Supermicro’s position in the competitive tech industry.

SMIC Shares Surge: Share Price Up Over 1130% YoY

Supermicro stocks have been moving upwards almost without any correction since April 2022. Between this date and today, the share price is up more than 2,046% with a strong acceleration over the last three months: +86.08% in January, +63.87% in February and +23.07% in March so far.

On March 8th, Supermicro shares touched their highest level on record, at $1,228.20, before slightly moving down a bit more than 10% to around $1,067 before the opening of the American session today.

Prices just moved below the Tenkan line of the Japanese Ichimoku indicator (blue line) and might move towards the Kijun line (red line) at around $947.20 if it keeps moving downwards. When the company hit its all-time high (ATH), its Relative Strength Index (RSI) left the overbought area and moved lower towards the neutral level of 50, moving now on a support level around 57 that has been tested several times in the past.

How to Invest in Supermicro

Bank of America Securities confirmed last Wednesday its buying rating on the tech company, as it should profit from rising interest in AI in the coming years. Moreover, the American bank has raised its target price from $1,040 to $1,280. If investing in growth stocks like Supermicro fits your trading and investment strategy, as well as your risk tolerance, there are different ways you can profit from this company.

The first method to invest in Supermicro is by acquiring shares through a brokerage account. There are two primary types of accounts available, largely determined by your investment timeframe.

You may opt for a cash account, which operates without leverage. This account type permits investment solely with the funds you deposit and is typically suitable for individual investors aiming to hold shares over a medium to long-term horizon. Moreover, this type of account bears relatively low risk and is often favored by beginners.

Alternatively, there is the margin account option, enabling you to borrow funds from the brokerage to invest beyond your initial capital, potentially increasing your returns (and losses) through leverage. Margin accounts are usually better suited for short-term traders, entail greater risk and require specific knowledge from traders, which means that this type of account isn’t for everyone.

While buying shares directly through a brokerage account remains the primary method, alternative strategies are available to gain exposure to Supermicro and similar companies. These alternatives often offer greater diversification, potentially mitigating your overall investment risk.

You can for instance consider broad market indices like the popular Americain index S&P 500, which now includes Supermicro. This grants exposure to a diverse array of established companies, with Supermicro being just one component within the index, providing a relatively lower risk investment vehicle.

If you’re particularly bullish on the technology sector or the artificial intelligence sector, you could also invest in thematic indices. These indices concentrate on specific industries or themes, potentially offering more focused exposure to Supermicro alongside other relevant companies. This targeted approach allows you to capitalize on a specific sector’s growth potential, despite a much more concentrated approach.

Similar to index funds, but for trading individual stocks, ETFs or Exchange-Traded Funds are another option. Many ETFs track specific indices, including those concentrated on technology or AI. By investing in an ETF that holds Supermicro, you can benefit from its performance while simultaneously diversifying your portfolio with other companies within this financial product.

ETFs often come with lower investment minimums compared to buying individual stocks and offer the convenience of trading on an exchange. It also often offers a good balance of diversification and targeted exposure with easier trade execution.

Disclaimer

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