Editing High-flying Super Micro Slides As Margin Squeeze Clouds Upbeat...

<br>By Medha Singh<br><br>Aug 7 (Reuters) - Shares of AI high-flier Super Micro Computer tumbled to a six month low on Wednesday as a faster-than-expected contraction in the server maker's gross margin overshadowed a robust sales forecast.<br><br>The company reported an adjusted gross margin of 11.3% for the fourth quarter, down from 17% a year earlier, and below analysts' average estimate of 14.1%, according to [https://www.fool.com/search/solr.aspx?q=LSEG%20data LSEG data].<br><br>"It seems like a company issue, not necessarily a demand issue and that's why the stock is getting punished and the market isn't," said Kim Forrest, chief investment officer at Bokeh Capital Partners.<br><br>"They were making money hand over fist but (it appears) they're ill-prepared to deal with the demand."<br><br>Competitive pricing also hit gross margin, the company said. Super Micro has lowered prices for its servers to stave off rivals such as Dell and HP Enterprise.<br><br>Dell dropped 4.4%, while HP Enterprise dipped 0.9%. The broader Philadelphia chip index rose 3.5%.<br><br>Among the biggest beneficiaries of the AI boom, Super Micro's shares have more than doubled in value in 2024, making it the best performing S&P 500 stock through Tuesday close.<br><br>The company's stock, which dropped 15.7%, logged a turnover of $3.9 billion by 10.30 a.m. ET,  [https://www.togeloleng.com/ kontol] more than Microsoft's $1.6 billion.<br><br>Super Micro also signaled on Tuesday that it was facing higher supply chain costs and a tight inventory of key components.<br><br>CEO Charles Liang, however, reassured investors that margins would return to a normal range before the end of fiscal 2025.<br><br>The company forecast first-quarter profit below Wall Street targets but expects quarterly and annual sales above estimates.<br><br>Some analysts also pointed to a recent hammering of chip stocks on concerns over their lofty valuation in a slowing economy for the sharp share drop.<br><br>"Right now with all the nervousness in the market, and rightly so, any miss on earnings, especially by a notably tech company (like SMCI), is going to bring a wave of selling," said Ed Cofrancesco, chief executive officer at broker-dealer International Assets Advisory.<br><br>"Still, long term, Super Micro is well positioned to continue to be a main player in AI infrastructure support."<br><br>The stock trades 17.24 times earnings estimates for the next 12 months, compared to Dell's 11.07 multiple.<br><br>Super Micro also announced a 10-for-1 stock split effective October 1.<br><br>(Reporting by Medha Singh in Bengaluru; additional reporting by Shashwat Chauhan; Editing by Alan Barona and Sriraj Kalluvila)<br><br>