Super Micro Computer (NASDAQ: SMCI) stock price surged by more than 10% in the extended hours after the company issued positive guidance. The shares surged to a high of $345 as it neared the year-to-date high of $357. This rebound helped to pare back most of the losses the stock had this year.

Super Micro Computer is one of the fastest-growing semiconductor companies in the world. As I wrote here, the company’s stock has constantly outperformed Nvidia, the biggest chip stock in the world. It has surged by almost 2,000% in the past five years while the S&P 500 has gained by less than 100% in the same period.

Super Micro Computer shares surged after the company published strong preliminary results for its second quarter. The firm said that its expected revenue range will be between $3.6 billion and $3.65 billion, higher than the previous guidance of $2.7 billion and $2.9 billion. This is a huge change, which implies that the company is firing on all cylinders.

Further, the company expects its GAAP net income per share to be between $4.90 and $5.05, also higher than the previous guidance of $3.75 and $4.24. Its non-GAAP figure will also be higher than guided at between $5.40 and $5.50. 

These figures were also higher than what most analysts were expecting. In this case, data by SeekingAlpha shows that the median revenue estimate among analysts was $2.85 billion while the EPS guidance was $4.55.

These results prove that IT spending is increasing as companies continue investing in artificial intelligence (AI) and other emerging technologies. IT consulting companies like Wipro, Infosys, and Kyndryl have all published strong results recently.

Super Micro’s update came on the same day that Taiwan Semiconductor published strong financial results, pushing its stock up by more than 20%. TSMC is usually seen as a barometer for the chip industry because it is the biggest manufacturer.

These results also invalidate the view among analysts that Super Micro’s growth and margins were starting to fade. This view was also supported by the fact that Super Micro is not the cheapest company globally as it trades at 2.5x sales and 34x PE. 

SMCI chart by TradingView

Looking at the weekly chart explains why the SMCI share price has come under pressure lately. It initially jumped to a high of $356.9 in August last year. It then pulled back to $227.35 and then bounced back. The stock has formed a double-top pattern, which is usually a bearish sign.

SMCI shares remain above the 100-week and 50-week Exponential Moving Averages (EMA), another bullish sign. Therefore, while the stock rebounded after its results, a more concrete bullish view will be confirmed if it moves above the double-top point at $356.91. If this happens, it will lead to a further upside to $400.

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