Tech stocks got whacked in 2022 — but one server maker soared almost 90%, beating all its peers
Charles Liang, CEO, Super Micro
Source: Supermicro
It’s been a brutal year for tech stocks. The Nasdaq is headed for its worst slump since 2008 and is poised to underperform the S&P 500 for a second straight year. Among mega-cap tech stocks, Amazon, Meta and Tesla have each lost at least half their value.
Investors looking for some sign of optimism can turn to a 29-year-old server maker located in the heart of Silicon Valley. Shares of Super Micro Computer have soared 89% in 2022, topping all other U.S. tech companies valued at $1 billion or more. Supermicro has a market cap of $4.4 billion, up from $2.4 billion at the start of the year.
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Supermicro manufactures computers and sells them to companies, which use them as servers for websites, data storage and applications like artificial intelligence algorithms. In the low-margin server business, Supermicro competes with Dell, IBM and Hewlett Packard Enterprise as well as lesser-known players such as China’s Inspur. According to estimates from The Next Platform, Supermicro had about 2.6% of the market in 2021.
Supermicro has sought to differentiate itself in the market by allowing customers to more easily customize their computers. That makes for a more profitable offering than off-the-shelf servers.
The strategy has been working. Supermicro reported 46% growth in its fiscal 2022, which ended in June, to $5.2 billion in revenue. Earnings per share climbed to $5.32 in 2022 from $2.09 in 2021 and $1.60 the year before that.
“The stock is actually just simply mirroring the EPS increases we have seen over two years,” said Nehal Chokshi, an analyst at Northland Capital Markets who recommends buying the stock. Chokshi has a price target of $165, by far the highest among five analysts tracked by FactSet.
Supermicro closed on Tuesday at $82.89.
Chokshi said that Supermicro’s profitability and growth have been strong enough that it might deserve a larger multiple. Yet even with this year’s rally, the stock is only trading at 8.6 times earnings over the next 12 months, which is lower than its five-year average of 9.5, according to FactSet. For the past 12 months, it trades at 10.1 times earnings, down from a five-year average of 17.8.
“There still hasn’t been multiple expansion,” Chokshi said. “A lot of investors, including myself, find that befuddling, because this is a name that has historically generated 20-plus percent revenue and EPS growth that’s trading only at 10 [times] earnings.”
Across the board, investors have taken a hatchet to tech multiples, reflecting concerns that soaring inflation and rising interest rates will dampen enthusiasm for growth stocks for the foreseeable future. The Nasdaq currently trades for 26 times earnings, compared with its five-year average of 35, according to FactSet.
Supermicro shares started rising in July and continued going up in August, after the company’s annual earnings report. They soared another 30% in November, after Supermicro showed a nearly 80% increase in year-over-year sales for the September quarter to $1.85 billion.
Manufacturing servers involves putting many different parts together. Supermicro starts with one of its own motherboards, plugs in a processor from Intel or AMD, or a graphics processor from Nvidia, and adds a power supply, RAM, networking and whatever other parts the computer might need. Supermicro will sell the client the motherboard, a fully assembled server, or an entire rack of servers.
Heading into 2023, the outlook for the server market is murky, especially in the early part of the year. Companies are tightening their belts, and likely to spend less on capital expenditures. Supermicro’s revenue growth is expected to moderate to about 32% in fiscal 2023 and 9% the following year.
But the company has at least regained the support of Wall Street after a rough stretch in the middle of the last decade. From 2015 through 2017, Supermicro had misstated financial statements and published some key filings late, according to the SEC.
“They have done a marvelous job of coming back,” said Susquehanna’s Mehdi Hosseini, who has a hold rating on the stock. “I would say they’re the comeback story of 2022. And that’s what’s reflected in the share price. But the management team has to remain very aggressive with their target.”
The comeback, according to Hosseini, is partially driven by confidence in CFO David Weigand, who has implemented strong internal financial controls since taking the job in early 2021.
“They became compliant with SEC filings in 2020, and it’s just been straight line up,” Hosseini said. “They have done really well.”
Bigger customers
Supermicro CEO Charles Liang told CNBC that the company’s recent performance reflects the size of the business and its ability to offer a wider array of products, particularly around customization.
While the company has been rapidly expanding in Taiwan, one component of its differentiation strategy, Liang said, is its San Jose, California, headquarters, where Supermicro still does the majority of its manufacturing.
Liang said it’s more expensive to build locally than overseas but doing so allows the company to be physically closer and more responsive to the chip companies it supplies as well as major customers like cloud providers and big websites.
“Silicon Valley enables us for better technology, faster time to market, and quick service, quick maintenance of our customer,” Liang said.
He said tech companies can move faster with Supermicro servers and are willing to pay for execution and the company’s design skills.
One area of notable growth is machine learning, or AI algorithms that require a large amount of computing power, usually centered around graphics processors made by Nvidia or AMD. Supermicro makes motherboards and systems that can combine up to eight GPUs together on a single board.
In the latest quarter, 45% of Supermicro’s revenue came from enterprise sales, including AI and machine learning products.
Another specialized market Supermicro is targeting is servers for 5G or telecom applications, using a new kind of approach called OpenRAN.
Supermicro is targeting $8 billion to $10 billion in revenue for fiscal 2024. To reach that goal, the company says it needs substantial growth from AI products and has to sell more complete systems, or servers already installed in a rack.
Current growth is being driven by Supermicro’s large data center business, which has been landing bigger accounts and comprised 50% of total sales in the September quarter, according to a November note from Wedbush analyst Matt Bryson, who has a neutral rating on the stock.
Supermicro said in November that a big unnamed customer was responsible for nearly 22% of the company’s sales in the quarter. In recent years, Supermicro had no single customer accounting for more than 10% of its sales.
‘Far more cautious’
Among analysts, there’s some skepticism that the company can hit its targets in a softer economic environment.
Susquehanna’s Hosseini said he recently downgraded the stock “because I think they will face headwinds in the next year” and the “growth targets are too aggressive.”
Intel and AMD have issued downbeat prospects for the server market, and companies of all sizes are cutting costs.
“While we applaud the quarter, we are far more cautious when thinking about Supermicro’s intermediate to longer term path and in particular view the company’s now stated goal of $8 billion to $10 billion in revenues in 2024 with trepidation given the headwinds noted above,” Wedbush’s Bryson wrote.
Analysts at Evercore said in a note this month that they expect server market revenue growth to slow to about 2.7% globally in 2023 from 13.5% last year. Server makers like Supermicro need to carry a lot of inventory and may face margin pressure if sales slow.
Northland’s Chokshi said that Supermicro’s strengths, especially in AI systems, could allow it to weather a market downturn better than its rivals.
“While their competitors are showing strong signs that there is a significant capex down cycle, their results are accelerating,” Chokshi said. “So far, they’re showing no signs of this cycle catching up to them.”
Liang is confident that Supermicro can continue to gain new customers, even if growth slows from its recent torrid pace.
“In a good year, growth will be around 80%,” he said. “In a bad year, hopefully 20%.”
WATCH: Tech stock expectations are coming down but not fast enough
The Applied Materials logo on Dec. 17, 2024.
Nurphoto | Nurphoto | Getty Images
Applied Materials shares sank more than 10% in extended trading Thursday as the semiconductor equipment company provided outlook for the current quarter that came in light.
Here’s how Applied Materials did in its third-quarter earnings results versus LSEG consensus estimates:
- EPS: $2.48, adjusted, versus $2.36 estimated.
- Revenue: $7.3 billion vs $7.22 billion estimated.
Applied Materials said it expects $2.11 per share in adjusted earnings in the current quarter, lower than LSEG estimates of $2.39 per share. The company said to expect $6.7 billion in revenue, versus $7.34 billion estimated.
CEO Gary Dickerson said that the current macroeconomic and policy environment is “creating increased uncertainty and lower visibility.” He said the company’s China business is particularly effected by the uncertainty.
The Trump administration’s tariffs could double the price of imported chips unless companies buying them commit to building in the U.S. Applied Materials makes tools for chip foundries to physically make chips, much of which currently happens in Asia.
Applied Materials said that it has a large backlog of pending export license applications with the U.S. government, but that it’s assuming none of them will be issued in the next quarter.
“We are expecting a decline in revenue in the fourth quarter driven by both digestion of capacity in China and non-linear demand from leading-edge customers given market concentration and fab timing,” the company’s finance chief said in a statement. He added that it expected lower China business to continue for several more quarters.
Applied Materials reported $1.78 billion in net income, or $2.22 per diluted share in the quarter, versus $1.71 billion or $2.05 in the year-ago period.
The company’s most important division, semiconductor systems, reported $5.43 billion in sales, topping estimates, and representing a 10% rise from last year.
Applied Materials was praised by President Donald Trump earlier this month after it was included in an Apple program to make more chips in the U.S.
Apple said it would partner with the chipmaker to produce more manufacturing equipment in Austin, Texas.
WATCH: Apple and Trump detail $100 billion U.S. spending expansion: Here’s what to know
Lip-Bu Tan, chief executive officer of Intel Corp., departs following a meeting at the White House in Washington, DC, US, on Monday, Aug. 11, 2025.
Alex Wroblewski | Bloomberg | Getty Images
Intel shares rose 7% on Thursday after Bloomberg reported that the Trump administration is in talks with the chipmaker to have the U.S. government take a stake in the struggling company.
Intel is the only U.S. company with the capability to manufacture the fastest chips on U.S. shores, although rivals including Taiwan Semiconductor Manufacturing Company and Samsung also have U.S. factories. President Donald Trump has called for more chips and high technology to be manufactured in the U.S.
The government’s stake would help fund factories that Intel is currently building in Ohio, according to the report.
Earlier this week, Intel CEO Lip-Bu Tan visited Trump in the White House, a meeting that took place after the president had called for Tan’s resignation based on allegations he has ties to China.
Intel said at the time that Tan is “deeply committed to advancing U.S. national and economic security interests.” An Intel representative declined to comment about reports that the government is considering taking a stake in the company.
“We look forward to continuing our work with the Trump Administration to advance these shared priorities, but we are not going to comment on rumors or speculation,” the spokesperson said.
Tan took over Intel earlier this year after the chipmaker failed to gain significant share in artificial intelligence chips, while it was spending heavily to build its foundry business, which manufactures chips for other companies.
Intel’s foundry business has yet to secure a major customer, which would be a critical step in moving towards expansion and giving other potential customers the confidence to turn to Intel for manufacturing.
In July, Tan said that Intel was canceling plans for manufacturing sites in Germany and Poland and would slow down development in Ohio, adding that spending at the chipmaker would be closely scrutinized.
Under Trump, the U.S. government has increasingly moved to put itself at the center of deals in major industries. Last week, it said it would take 15% of certain Nvidia and Advanced Micro Devices chip sales to China. The Pentagon bought a $400 million equity stake in rare-earth miner MP Materials. It also took a “golden share” in U.S. Steel as part of a deal to allow Nippon Steel to buy the U.S. industrial giant.
Intel shares are now up 19% this year after losing 60% of their value in 2024, the worst year on record for the chipmaker.
WATCH: Trump decision to allow chip sales to China is ‘reverse tariff’
Alexander Karp, chief executive officer and co-founder of Palantir Technologies Inc.
Scott Eelis | Bloomberg | Getty Images
Palantir‘s astronomical rise since its public debut on the New York Stock Exchange in a 2020 direct listing has been nothing short of a whirlwind.
Over nearly five years, the Denver-based company, whose cofounders include renowned venture capitalist Peter Thiel and current CEO Alex Karp, has surged more than 1,700%. At the same time, its valuation has broken new highs, dwarfing some of the world’s technology behemoths with far greater revenues.
The artificial intelligence-powered software company continued its ascent last week after posting its first quarter with more than $1 billion in revenue, reaching new highs and soaring past a $430 billion market valuation.
Shares haven’t been below $100 since April 2025. The stock last traded below $10 in May 2023, before beginning a steady climb higher.
Retail investors are a key part of the stock’s strength.
Last month, retail poured $1.2 billion into Palantir stock, according to data from Goldman Sachs.
Here’s a closer look at Palantir’s growth over the last five years and how the company compares to megacap peers.
Government money
Government contracts have been one of Palantir’s biggest growth areas since its inception.
Last quarter, the company’s U.S. government revenue grew 53% to $426 million. Government accounted for 55% of the company’s total revenue but commercial is showing promise. Those revenues in the U.S. grew 93% last quarter, Palantir said.
Still, one of the company’s oldest customers is the U.S. Army.
Earlier this month, the company inked a contract worth up to $10 billion for data and software to streamline efficiencies and meet growing military needs. In May, the Department of Defense boosted its agreement with Palantir for AI-powered battlefield capabilities by $795 million.
“We still believe America is the leader of the free world, that the West is superior,” Karp said on an earnings call earlier this month. “We have to fight for these values; we should give American corporations, and, most importantly, our government, an unfair advantage.”
Beyond the U.S.
The U.S. has been a key driver of Palantir’s growth, especially as the company scoops up more contracts with the U.S. military.
Palantir said the U.S. currently accounts for about three-quarters of total revenues. Commercial international revenues declined 3% last quarter and analysts have raised concerns about that segment’s growth trajectory.
Over the last five years, U.S. revenues have nearly quintupled from $156 million to about $733 million. Revenues outside the U.S. have doubled from about $133 million to $271 million.
Paying a premium
Palantir’s market capitalization has rapidly ascended over the last year as investors bet on its AI tools, while its stock has soared nearly 500%.
The meteoric rise placed Palantir among the top 10 U.S. tech firms and top 20 most valuable U.S. companies. But Palantir makes a fraction of the revenue of the companies in those lists.
Last quarter, Palantir reported more than $1 billion in quarterly revenue for the first time, and its forward price-to-earnings ratio has surged past 280 times.
By comparison, Apple and Microsoft posted revenue of $94 billion and $76 billion during the period, respectively, and carry a PE ratio of nearly 30 times.
Forward PE is a valuation metric that compares a company’s future earnings to its current share price. The higher the PE, the higher the growth expectations or the more overvalued the asset. A lower price-to-earnings ratio suggests slower growth or an undervalued asset.
Most of the Magnificent Seven stocks, except for Nvidia and Tesla, have a forward PE that hovers around the 20s and 30s. Nvidia trades at more than 40 times forward earnings, while Tesla’s sits at about 198 times.
At these levels, investors are paying a jacked-up premium to own shares of one of the hottest AI stocks on Wall Street as its valuation has skyrocketed to astronomical heights.
“This is a once-in-a-generation, truly anomalous quarter, and we’re very proud,” Karp said on an earnings call following Palantir’s second-quarter results. “We’re sorry that our haters are disappointed, but there are many more quarters to be disappointed.”
CNBC’s Gabriel Cortes contributed to this story.
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