SMCI 'just too important a player' in AI space to be delisted, says analyst

Investing.com -- Super Micro Computer Inc (NASDAQ:SMCI) shares rocketed more than 23% in premarket trading Tuesday after the AI server maker surprisingly introduced an independent audit firm at the last minute and submitted a compliance plan to NASDAQ.

The move could potentially avert the company’s delisting, though NASDAQ still needs to formally approve the plan and grant an extension for the filing of its 10-K.

Still, an analyst at Lynx Equity Strategies views this approval as likely to be "just a formality."

In an earlier note, Lynx analyst KC Rajkumar stressed that SMCI is "just too important a player in the AI data center space for it to be allowed to delist and go fallow."

“While we claimed no knowledge of the timing of regulatory filing, we opined that delisting, leading to loss of access to capital, was a low probability event,” he added.

He also noted the stock was trading at a significant discount and set a price target (PT) of $45.

Following the filing of an 8-K form last night, which significantly reduces the risk of delisting, Rajkumar believes a "vicious short-squeeze" could occur in SMCI shares.

The stock initially surged 30% in after-hours trading, and the analyst now expects it to "make a run for our PT in the near term."

He also warned that hardware peers like Dell (NYSE:DELL), which had seen investor interest on the expectation of capturing SMCI's market share, may face a decline in their stock prices.

Reiterating its view, Lynx emphasized SMCI’s leadership in the scalable AI data center market for liquid-cooled server racks.

“SMCI has a leadership position in the rapidly expanding liquid-cooled GPU server data center market, a position it is unlikely to give up any time soon,” Rajkumar continued.

During SMCI’s recent delisting uncertainty, some investors speculated that Nvidia (NASDAQ:NVDA) might redirect GPU server orders away from SMCI to other players, with Dell being a potential beneficiary. However, Lynx analysts disagree, arguing that scalable liquid cooling technology is not a commoditized market and that infrastructure vendors like SMCI are not easily replaceable.