Super Micro's Guidance Cut Sparks 16% After-Hours Collapse: Is the AI Valuation Bubble Bursting?

TradingKey - Super Micro Computer (SMCI) reported lackluster core metrics in its fiscal Q4 earnings release on Tuesday, coupled with a significantly lowered revenue outlook for fiscal 2026, intensifying investor concerns. Shares plunged over 16% in after-hours trading.

Source: Google Finance

In Tuesday’s results, SMCI management set its fiscal 2026 revenue expectation (ending June 2026) at a minimum of $33 billion – substantially below the $40 billion optimistic guidance issued in February. The company had previously withdrawn its early forecast in May, citing "visibility remains unclear."

Additionally, for the current quarter (fiscal Q4 2025), the company projected revenue between $6.0–7.0 billion, with a midpoint of $6.5 billion, falling short of the $6.63 billion consensus estimate from FactSet analysts. This further eroded market confidence, raising questions about the company’s ability to secure stronger AI server orders leveraging the extremely high-demand Nvidia Blackwell or Blackwell Ultra architecture series chips.

Notably, SMCI’s gross margin for the most recent quarter stood at just 9.5%, slightly down from 9.6% in the March quarter and 10.2% in the June quarter, extending a consecutive downward trend.

This weakness stems partly from shifting supply chain dynamics. Since 2023, the company has benefited from surging demand for AI data center servers equipped with Nvidia chips, propelling its stock to nearly double its current level.

As market conditions evolve, while AI server demand remains robust, competition has intensified significantly – with more players entering the space, narrowing product differentiation, and increasing pricing pressure.

A Wedbush analyst wrote prior to Tuesday’s report that he expected gross margins to remain a “potential point of weakness,” partly stemming from Nvidia Corp.’s product transition. His industry conversations suggested that Nvidia content is making up a bigger portion of the bill of materials, squeezing vendor margins, especially when the design of Nvidia’s GB200 rack-scale offerings provide “little room for differentiation.”

Bloomberg Intelligence analyst Woo Jin Ho stated: "The disappointing outlook highlights the fiercely competitive environment for large AI server deals, with SMCI’s market share potentially eroding."

The recent outlook downgrade has revealed underlying concerns within the industry—sales and pricing pressures for high-performance AI servers may be widespread, leading investors to question the overall valuation rationale of the sector.

Currently, leading stocks such as NVIDIA and Broadcom are trading at historical peak price-to-earnings (P/E) ratios, betting on an "infinite expansion" of AI computing demand. However, the case of AMD reveals that bubble risks should not be overlooked; if competition continues to intensify and gross margins fail to improve, more technology companies could enter a downturn.

Some analysts fear that this might be a precursor to "bursting the bubble," especially as capital flows become more cautious in a high-interest-rate environment.

Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, noted: "The expectations surrounding everything related to AI—particularly driven by an influx in demand for inference models—have attracted considerable investor attention. Any level of weakness will lead to profound disappointment, which suggests that stock prices may continue their downward trend."