Super Micro Is the S&P 500’s Biggest Gainer. The Stock Could Break Out.

Super Micro Computer CEO Charles Liang. (Annabelle Chih/Bloomberg)

Key Points

• Super Micro Computer stock rose 6.3% to $55.65 on Monday, contributing to an 82% gain this year.
• The company’s shares are forming a “cup and handle” pattern, suggesting potential for sharp near-term price increases.
• Super Micro was the second-most shorted stock in the S&P 500 as of Sept. 30, with 18% of shares sold short.

Super Micro Computer stock was on pace to end Monday’s session as the top performer in the S&P 500 index, as bullish attitudes on Wall Street lifted shares higher.

The stock snapped a two-day losing streak and rose 6.3% to $55.65, hovering below its 52-week high of $66.44. Peers Hewlett Packard Enterprise and Dell Technologies were down 0.4% and 1.1%, respectively.

Super Micro, which makes servers and storage products for data centers, falls into the broader category of artificial intelligence-linked names that have seen explosive gains lately. Shares have surged 82% this year, outstripping a 15% gain for the S&P 500. In the past month alone, they have risen more than 20%.

A look at the stock-price chart points to potential future gains. Barron’s technical analyst Doug Busch says the stock is now forming a classic “cup and handle” pattern, a setup where the price first dips, recovers to previous highs, then pulls back slightly to form the handle before potentially breaking out. If a cup and handle is confirmed, the price should increase sharply in the near term.

While institutional investors own the lion’s share of Super Micro stock at over 50%, according to securities filings, the stock maintains a dedicated base of retail investors. As of Sept. 30, Super Micro was the second-most shorted stock in the S&P 500, just below Moderna , with 18% of shares sold short as a percentage of its float.

Traders who have borrowed the stock and sold it, hoping to buy it back at a lower price, could have to buy it back in a hurry if shares begin to rally.

The stock has recovered from its November 2024 lows, when uncertainty over its potential delisting from the Nasdaq weighed on shares. Although Super Micro narrowly avoided this outcome months later, shares sold off in April when the company posted weaker-than-expected preliminary results for its fiscal third quarter.

The boom in capital spending on data centers and continued enthusiasm for AI has lifted shares higher. Last week, Super Micro introduced a new business segment focused on “data center building block solutions,” which allows customers to design, order, and build complete data centers from a single vendor.

The last major update on Super Micro’s performance came in August, when CEO Charles Liang told investors the company lacked the working capital to expand production as quickly as he would have liked. Shares tumbled as the server maker missed analysts’ estimates for adjusted earnings and revenue.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com