The rally in Super Micro Computer (NASDAQ: SMCI) stock continued today as investors got another positive data point on the artificial intelligence (AI) server maker.
One day after the stock jumped after Wall Street analysts said it was one of the best ways to get exposure to AI, Supermicro, as the company is often known, was gaining again on a new deal with DataVolt, a Saudi Arabian data center company. The agreement was one of several announced between U.S. semiconductor companies and Saudi Arabian entities this morning.
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As of 1:08 p.m. ET, the stock was up 17% on the news.
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Supermicro scores a win
This morning, DataVolt said it was signing a multiyear partnership agreement with Supermicro to deploy server solutions and rack systems for AI cloud computing in Saudi Arabia and the U.S.
The deal is valued at $20 billion and comes at a time when Supermicro is still reeling from a delay in financial reporting that sent the stock tumbling.
Investors now seem to be regaining confidence in the business, lifting the AI stock.
Can Supermicro keep moving higher?
It’s important to consider that $20 billion, even over several years, is a large price tag for Supermicro, as its market cap is only $27 billion.
The company also announced several improvements to its direct liquid cooling (DLC) platform, showing that its technology continues to advance, as it’s regarded as a leader in AI storage and server solutions.
Supermicro has struggled to maintain its gross margins in recent quarters, but advancing technology and a big new contract could help reverse that trend. Investors should keep an eye on that figure going forward. If the company can drive gross margin higher, the stock is likely to follow.
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Jeremy Bowman has positions in Super Micro Computer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
