$ORCL

Summary

The analyst has taken a long position in SMCI, citing strong fundamentals, a large backlog, and upcoming Q3 earnings as catalysts for a positive re-rating despite risks from DOJ investigation and order cancellations.

Reasoning

SMCI has strong Q2 revenue and earnings beats, a large backlog, and a FY2026 guide above $40B driven by product ramps. The stock trades at a discount due to investigation and order cancellation risks, but fundamentals remain solid with sector tailwinds from AI demand and CPU-agnostic integrations. Upcoming Q3 earnings could confirm growth and margin recovery.

My new "f*** it" long from last week is $SMCI TLDR: Fundamentals are still in-tact, so a clean Q3 earnings could result in a positive re-rating. 1. Momentum: - Q2 FY2026 rev = $12.7B (+123% YoY) + massive EPS beat + >$13B Blackwell Ultra backlog (largest in $SMCI history). - FY2026 guide of $40B+ w/ DCBBS & DLC ramps set to drive margin recovery into FY2027. 2. Currently at huge discount: - $SMCI are at just ~0.3x fwd P/S - Due to the March DOJ overhang & $ORCL cancellation. - But fundamentals still look good (e.g. hyperscaler demand) = creates a high conviction entry where governance risk is probably (hopefully lol) already priced in. 3. Q3 earnings catalyst (May 5th): - Earnings will deliver first full Blackwell ramp results, backlog updates, DCBBS margin trajectory + any investigation progress. - Anything above $12.3B floor signals strong Blackwell conversion + no huge order slippage from the $ORCL cancellation. - Raising FY guidance would confirm the $40B+ run-rate is intact. Q3 is between Hopper wind down & Blackwell/Rubin acceleration. That would then prove $SMCI's modular Building Block + DLC moat is still winning share. 4. Sector tailwinds: - $DELL $43B AI backlog, HPE sovereign-AI traction. - $DELL also commented that $SMCI's investigation created openings in compliance-sensitive accounts. Which imo, just solidifies $SMCI if they can fix their sh*t together. - $INTC surge on data center CPU demand proves the AI compute boom is broadening beyond pure GPUs into the rack-scale integration layer where $SMCI sits. - Both $DELL + $INTC points also validate that hyperscaler capex is accelerating. 5. $SMCI's fundamentals still in tact: - $SMCI basically have CPU-agnostic integrations, which lets them capture upside from whichever CPU supplier has better supply or pricing. - When $INTC reported massive data center CPU demand in their earnings, $SMCI was already shipping + collaborating on benchmarks like STAC-M3 (record results with $INTC & $MU). - Also, $AMD's EPYC push (H14 servers with Instinct GPUs) gets accelerated via $SMCI's rack-ready solutions. - $SMCI still delivers 3-6 month advantage over $DELL etc. on Blackwell Ultra + Rubin pre-qualification via their Modular Building Block + DLC leadership. Important where speed is everything for hyperscalers rn. But the risk is another major cancellation (like $ORCL) or any DOJ escalations. Sentiment is already really negative towards $SMCI, so anything even relatively minor during Earnings would be bad. Regardless, $SMCI ultimately remains the fastest integrator in the supply chain. At the exact moment hyperscalers need to deploy faster than ever due to growing capex.

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