To The Moon

$Microsoft(MSFT)$ appears to be stepping back on multiple data center projects both domestically and globally. (see below)

At the same time, it is raising new doubts about the speed of artificial intelligence (AI) infrastructure development.

Although MSFT still maintains that it’s still on target to invest $80 billion in capital expenditures in 2025 alone, the charge has since raised investors’ concerns.

But, to say that the AI-hype is over will be a misnomer. This is because it (AI) will be next IT frontier for businesses to adopt & refine over time.

Menial & repetitive tasks will, increasingly be taken over by customized AI apps, improving productivity and driving down costs of businesses drastically.

Right-Sizing.

Current scale back is believed to have been trigger by uncertainties brought about by tariffs fallout initiated by Trump.

Within US, there are already 5 cancellations or “halt” as MSFT termed them.

Locations are : Illinois, North Dakota, Wisconsin, Iowa and Ohio. (see above)

Globally, MSFT is halting AI data centres in the United Kingdom, Australia and Indonesia. (see above)

Connecting the dots.

With MSFT’s slow down set in motion, it is easy to accurately pinpoint, who will be affected - $SUPER MICRO COMPUTER INC(SMCI)$ of course.

Afterall MSFT has been a VIP-customer of SMCI with the latter :

• Partnering MSFT to deliver fully certified solutions optimized for MSFT’s products.

• Providing rack-scale AI infrastructure solutions that cater to large cloud service providers (CSPs), that includes MSFT.

In short, SMCI is a top AI server vendor whose growth narrative is tightly linked with the capital expenditure of the hyperscalers that includes OpenAI / Softbank’s Stargate Project, mooted by Trump.

With demand for data centers slowing down, many wonder if SMCI's rapid growth is fading all too quickly?

SMCI - in brief.

A US based company that develops energy-efficient, application-optimized servers for AI, cloud, and enterprise data centers.

Headquartered in San Jose, California, SMCI (with a market cap of $17.698 billion as of 04 Apr 2025) serves big-name hyperscalers and gains directly from AI-driven infrastructure expenses.

Of late, its shares have been incredibly volatile: (see above)

• It jumped from a 52-week low of $17.25 to a peak of $102.23.

• Then backed down recently to $29.82 to close out 04 Apr 2025.

• It represented a precipitous correction of almost +72% from its high and a -70% fall over the last year.

• “Thankfully”, in the midst of the reciprocal tariffs unrest, SMCI managed to recover some lost grounds, closing Fri, 11 Apr 2025 at $33.15 per share. (see below)

Having said that, it has a ‘stellar’ track record of:

• YTD return of over +10.32% (as of 11 Apr 2025).

• 5-year return of over +1,440%. (as of 11 Apr 2025).

Technical Analysis facts.

SMCI stock trades at:

• A forward P/E ratio of 16.1x.

• A trailing price-earnings ratio of 14.7x.

• A price-sales ratio of 1.39x.

Latest valuation appears modest when compared to the company’s historical growth.

Clearly indicating, increasing apprehension over future momentum. 

Analysts’ Expectations & Ratings.

Out of the 14 analysts that covered SMCI, overall results are:

• A “Hold” consensus recommendation.

• Grading of 3.29 out of 5 - Average. (see above)

In terms of recommendations:

• “Strong Buy - 3”.

• “Moderate Buy - 2”,

• “Hold - 7”.

• “Strong Sell - 2”.

Although analyst sentiment has lifted somewhat over the past month, it’s still mixed.

SMCI’s rating is muted by the concerns over future earnings stability as a result of potential Capex postponements by Microsoft and other hyperscalers.

This will be exacerbated by the fallout from Trump’s tariffs that is rocking all stock markets on Mon, 07 Apr 2025. (see below)

With US banks kicking off Q1 2025 quarterly earnings season on Friday, how much of earning seasons vs tariffs turmoil will affect US market in the coming weeks is left to be played out.

For sure, with MSFT officially announced a scale back to AI data centres build, will $Amazon.com(AMZN)$, $Meta Platforms, Inc.(META)$ and OpenAI/Soft Bank follow suit next?

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