Shares of Super Micro Computer (NASDAQ: SMCI) declined 3.3% to $29.10 in Monday morning trading, as a broad selloff in semiconductor stocks overshadowed the company's recently upgraded margin outlook. The drop came as the server maker faces mounting liquidity pressure amid a surge in artificial intelligence orders exceeding $60 billion.
The PHLX Semiconductor Index fell 3.9%, marking its third consecutive decline, with major chip stocks leading the downturn. Nvidia (NASDAQ: NVDA) slid 3.5%, and Advanced Micro Devices (NASDAQ: AMD) dropped 6.4%. Other server manufacturers also retreated, with Dell Technologies (NYSE: DELL) down 3.3% and Hewlett Packard Enterprise (NYSE: HPE) falling 0.8%.
Super Micro's preliminary fourth-quarter results, released late last week, showed a sharp improvement in gross margin. The company now expects gross margin of 15% to 17%, up from its previous guidance of 8.2% to 8.4%. At the midpoint, this implies a gross profit of approximately $1.87 billion on revenue of $11 billion, an increase of about $847 million from earlier projections.
However, the margin boost was tempered by revenue guidance that came in near the lower end of the $11 billion to $12.5 billion range. The company also disclosed that it secured more than $60 billion in new orders during the quarter, equivalent to over 5.4 times its lowest quarterly revenue estimate. While this order book signals strong demand for AI infrastructure, it has shifted investor attention to the company's ability to convert those orders into cash.
Cash conversion has become the key test for Super Micro. The company reported negative operating cash flow of $6.6 billion in the third quarter, with cash and cash equivalents of just $1.3 billion as of March 31, against total debt and convertible securities of $8.8 billion. In June, Super Micro raised $7 billion through equity and equity-linked offerings to purchase components for approximately $39 billion in AI orders.
Rosenblatt analyst Sajal Dogra highlighted the order size as evidence of an "industry-leading time-to-market advantage" and raised the price target to $45 from $40, maintaining a Buy rating. Conversely, Mizuho's Vijay Rakesh kept a Neutral rating while trimming the target to $34 from $44, citing potential supply constraints on components and memory, as well as delays in shell construction.
Risks remain elevated. Some orders may not be binding, and the company faces exposure to customer concentration, tariffs, and an ongoing independent review related to alleged export-control violations. Additional equity raises could also dilute existing shareholders.
Super Micro is scheduled to report full fourth-quarter results after the market close on August 11. Investors will scrutinize the margin trajectory, operating cash flow, and the pace of order conversion. The market has acknowledged the margin recovery for now, but continues to seek proof in cash.
