The Super Micro Computer (NASDAQ: SMCI) stock price continued its bearish trend last week as demand for technology companies retreated. It has moved into a deep bear market, falling by more than 26% from its highest level this year and is hovering near its lowest point since March 20th. 

There are three main reasons why the SMCI stock price has crashed hard in the past few weeks. First, the crash is in line with the performance of the broader American stock market. The Nasdaq 100 index is down by over 2.67% from its highest point this year while the Dow Jones crashed by more than 4.78%.

Second, the stock has crashed because of the ongoing artificial intelligence (AI) fatigue that has pushed other similar stocks downwards. Nvidia, the gold standard for the AI industry, has moved into a correction as it crashed by over 10% from its highest level this year.

Other popular AI companies have also retreated. C3.ai stock has dropped by over 41% from its highest point this year while SoundHound AI has retreated by over 57% from the year-to-date high. Other AI companies like AITX and AMD have also pulled back.

Third, the Super Micro Computer’s stock price has collapsed because of the ongoing change in tune by the Federal Reserve. Recent economic numbers revealed that US inflation has remained stubbornly high this year, meaning that the Fed may not cut as it had hinted a few months ago. 

Therefore, some analysts, including Larry Summers have warned that the Fed will hike interest rates this year. Alternatively, the bank might decide to maintain rates at the current level for longer than expected. In most periods, growth companies like SMCI tend to retreat when the Fed is hawkish.

This week will be an important one for the Super Micro Computer stock as the company is set to publish its financial results on Thursday. These results will provide more information about the company’s financials and growth.

Analysts expect the results to reveal that SMCI’s earnings will be $5.84 per share followed by $7.19 in the next quarter. They also expect that the company’s revenue surged to $4.01 billion from $3.6 billion in the fourth quarter. The company made $1.28 billion in the same quarter in 2023.

If these earnings estimates are accurate, they will signal that the company was doing well as demand for AI chips continues rising. For example, if the company’s revenue rises to $4 billion in Q1, they will be higher than what it made in its full-year in 2021.

Traders will focus on the company’s revenue and profitability growth and its forward guidance. The average guidance is that the company’s revenue will rise to $4.91 billion in the current quarter. Its annual revenue is expected to come in at $14.6 billion this year followed by $20.7 billion next year.

SMCI chart by TradingView

The Super Micro Computer share price peaked at $1,230 in March and has plunged below $900. It is now sitting at a crucial support level now that it is slightly above the 50-day Exponential Moving Average (EMA). 

SMCI shares have also received support at $854.91, its lowest swing on March 20th. It has also moved to the Weak, Stop & Reverse level of the Murrey Math Lines. The stock has also remained above the ascending trendline shown in black.

Therefore, the outlook for the stock is neutral with the next support and resistance levels to watch being at $800 and $1000 this week.

The post SMCI stock price forecast: critical week for Super Micro Computer appeared first on Invezz