Supermicro initiated with a Neutral at Mizuho

Mizuho initiated coverage of Supermicro with a Neutral rating and $450 price target. The analyst says generative artificial intelligence “is igniting growth and disruption” across multiple markets, including AI servers which comprise the infrastructure enabling the AI revolution. The firm sees two major server manufacturers “spearheading this future:” Supermicro (SMCI) and Dell Technologies (DELL). Generative AI is growing exponentially, supporting secular growth in the AI server market, but there are profitability risks from low differentiation, a concentrated customer base, and increasing competition, the analyst tells investors in a research note. Mizuho believes Super micro is seeing share loss, margin pressure, negative free cash flow, and lax internal control issues. Dell is better positioned with a broader portfolio and better balance sheet, the firm contends.