SMCI: The Real Bubble Stock

Today the stock market officially became a bubble. There’s been a lot of talk lately about if the stock market is in a bubble. The consensus seems to be that there’s some froth but it’s not a bubble. Most of the focus is on Nvidia (NVDA). Bears point to the parabolic move while bulls talk about the incredible fundamentals (for more on NVDA see “How Much Is NVDA Worth?”, Top Gun Financial, 2/22). But whatever your view on NVDA, I think the real bubble stock is Super Micro Computer (SMCI),

On the afternoon of Thursday January 18, SMCI preannounced spectacular earnings. They had blown out guidance. On Friday, SMCI rallied 40% on volume of 23 million shares. You can clearly see the huge jump in volume in the chart above. The stock has been on a tear ever since, going from $300 to nearly $1100 in a little over 6 weeks.

On January 29, SMCI announced terrific earnings and increased its full year revenue guidance substantially to $14.3-$14.7 billion from $10-$11 billion. And today it was announced that the stock will be added to the S&P 500 sending shares another 20% higher.

SMCI only had 56 million shares outstanding as of January 31, according to its latest 10Q. That means a substantial portion of SMCI’s shares are trading every day. It is a frenzy. SMCI is a real company with a real business and real profits. That’s a big increase in guidance they made on January 29. But I suspect that when we look back on this moment it will be recognized for what it is.