Ultramicrocomputer (SMCI.US) revenue guidance raised by 27% Goldman Sachs (GS.US) is still bearish: AI demand is strong but the valuation has been overdrawn

According to Woofun AI, there is a strong contrast between Super Micro Computer (SMCI)'s first-quarter results, which greatly exceeded expectations and Goldman Sachs (GS.US) (Goldman Sachs) maintained a sales rating. Despite significant improvements in the company's fundamentals, Goldman Sachs set a target price of $34, believing that the current upward space for stock prices is extremely limited.

At the financial data level, SMCI showed growth momentum that far exceeded market expectations. According to the company's pre-announcement, its revenue guidance range for the first quarter was 18.5 billion to 19.5 billion US dollars. The median value of this figure was about 27% higher than the median value of the previous guidance, and also greatly exceeded the $15 billion expected by Goldman Sachs and FactSet (the original guidance range was 14.5 billion to 15.5 billion US dollars). The gross margin was also impressive. The range of the new guideline was 12% to 12.5%, which is 165 basis points higher than the median value of the original guideline (10.4% to 10.8%).

According to data compiled by Woofun AI, this combination of revenue and gross margin exceeded expectations, mainly due to the strong explosion in demand for AI platforms and favorable customer product structure optimization. It is worth noting that SMCI has not updated its total revenue guidelines for the 2027 fiscal year. The previously set range of US$65 billion to US$72 billion is still in effect. The full financial details and earnings per share guidance will have to be further disclosed in the November 3 earnings call. Goldman Sachs analysis points out that the median revenue of $19 billion is extremely rare in the hardware industry. This directly confirms that demand for AI servers has not slowed down, and the coverage has extended from hyperscale vendors to new cloud vendors, enterprises, and government agencies. The overall increase in training and reasoning requirements has driven this performance explosion.

Industry spillover effects and potential risks coexist, forming another focus of market attention. SMCI's strong performance had a positive conduction effect on competitor Dell Technologies (DELL). Goldman Sachs believes that SMCI's strong demand for AI platforms in the September quarter indicates that the overall AI server market capacity is huge. Dell Technology's 2027 fiscal year (ending January 2027) AI server sales target of $74 billion may be conservative, and there is room for improvement. Based on this logic, Goldman Sachs maintained Dell's buy rating and set a target price of $461.56.

Although SMCI competes with Dell in the market, the former customers are biased towards new cloud vendors and enterprises, while the latter is biased towards enterprises and governments, and the spread of demand has led to a simultaneous increase in orders from both parties. However, SMCI itself faces serious liquidity challenges. Last quarter data showed that its cash conversion cycle was 149 days long, and as revenue surpassed $80 billion, huge working capital requirements meant the company would most likely need to rely on external financing. Goldman Sachs emphasized that the tension between strong demand and financing capacity is a key variable in determining how far SMCI can go, and the November 3 earnings call will focus on observing whether its financing arrangements are in place.

The limitations of valuation logic are the core reason for maintaining a bearish attitude. As of October 20, SMCI closed at $32.47, while Goldman Sachs's 12-month target price of $34 was only 4.7% higher than the current price, which meant that the upward space for the stock price had been severely compressed. The target price is calculated based on 7.5 times earnings per share for the next 12 months plus 1 year. Although improved core operating margins, increased market share, and customer diversification pose potential upward risks, the current valuation fully reflects most optimistic expectations. Goldman Sachs pointed out that if SMCI fails to resolve external financing issues before revenue exceeds $80 billion, the possibility that its stock price will break through the target price will be greatly reduced. This is another rational review of the AI infrastructure sector's 'high growth, high valuation, and high capital consumption' model after many hardware vendors pulled back due to high valuations.