Jim Cramer Thinks It’s Time to Sell Super Micro Computer. Is That the Right Call?

Mad Money host Jim Cramer is a great guy to listen to when the volatility really starts picking up. Undoubtedly, it can be easy to panic when geopolitical risks spike over the weekend. And while selling first might make one feel the best, it’s not always the best way to go. While Cramer remains a big believer in the long-term potential of the AI, he did acknowledge that there has been a cooling-off period and that the stocks might begin to move in different directions rather than collectively. Undoubtedly, the risk/reward differs based on the AI stock.

Some names have a considerable debt load and less in the way of diversification, while others seem to have the key to next-level AI monetization. Either way, as the AI trade looks to move in varying directions, it might make sense to look at individual companies from the bottom up.

When asked about shares of Super Micro Computer (NASDAQ:SMCI | SMCI Price Prediction) from a caller, Cramer was quick to label the name as a sell, and it’s really not hard to imagine why. While Cramer didn’t elaborate much further, I do think his call has a good chance of being proven correct with his sell call.

Undoubtedly, there are lower-risk names in the AI trade to go with right now. And given shares of Super Micro Computer have already imploded by more than 83% from peak to trough before, there’s clearly potential for outsized moves in either direction. If Cramer’s “year of magical investing” really is over, it could prove difficult for a name like Super Micro Computer to recover the ground it had lost since its peak in 2024.

A Vera Rubin boom looms, but margins are a concern

Of course, Super Micro Computer seems to have all the makings of a marked-down recovery play, especially as demand for AI infrastructure stays hot through the year. With Vera and Rubin ready to go in the second half of the year, demand for the data center “building blocks” might also have the potential to march much higher. Whether we’re talking about optimized server racks, liquid cooling tech, or services needed to design a next-generation AI data center, there’s certainly surprise potential as we look into the back half of the year. 

With shares trading at just 25.4 times trailing price-to-earnings (P/E), it certainly feels like Super Micro Computer stock is more of a relative value play. At the same time, though, previous accounting scares might deter some investors. And with the potential for margins to contract further, there is a huge haze of uncertainty that might make the name less of a compelling value right here.

While Vera Rubin could bolster demand, the chips won’t come cheap, and it’s tough to tell whether the sales growth can offset the impact on margins. Add rising competition in the space, and it’s tough to be a net buyer of the dip unless you’ve got a high tolerance for risk.

Goldman Sachs lowered its price target

Recently, Goldman Sachs (NYSE:GS) kept Super Micro Computer stock as a “sell.” AI server margins were a concern, as was competition in the space. With a price target of $26.00 (down quite a bit from $34.00), Goldman actually sees the name moving lower from current levels. Undoubtedly, it’s rare to sell an underperform or sell rating from a big firm, so I do think playing it cautiously with Super Micro Computer is the best way to go.

Personally, the list of concerns might be a tad too high to justify punching a ticket at these depths. Could Super Micro Computer’s management prove the doubters wrong? Possibly. But there’s not much room for error, especially as investors demand more from the AI stocks in a year that might be the choppiest yet for the broad basket of names. Either way, I think Jim Cramer and other Wall Street pros are right to be muted on the name, given the risks that lie ahead.