Goldman Sachs has downgraded its rating on Super Micro Computer Inc. (SMCI.US) stock to "Sell." Analysts at the firm issued a warning that the company's persistent trend of declining profit margins could potentially negate the positive impact from the robust growth in demand for AI servers. Goldman Sachs analyst Kathryn Murphy reduced the 12-month price target for the stock to $26 per share from $34, highlighting that over the past three years, Super Micro Computer's profit margins have contracted significantly, falling to 9.5%. She further added that, given the company's current pursuit of large-scale deals that could dilute margins, there remains substantial uncertainty regarding its future profitability. Goldman Sachs analysis points out that Super Micro Computer continues to hold a leading position in the AI server market, with particularly strong performance in the secondary cloud services segment. However, the firm is facing structural pressures due to its high supplier concentration, with purchases from just one single supplier currently accounting for as much as 64% of its total. Murphy expressed skepticism about the viability of Super Micro Computer's expansion strategy, which leverages its Data Center Building Blocks platform. She noted that software business currently contributes less than 2% to the company's overall revenue, and its sales team size remains significantly smaller compared to its competitors. Goldman Sachs' earnings per share forecast for Super Micro Computer is approximately 10% below the prevailing market consensus. Concurrently, Goldman Sachs also cautioned that even if Super Micro Computer's strong revenue growth trajectory continues, there remains a possibility of further margin erosion.
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