Shares fell 13% in extended trading on Tuesday

The central theses

• Super Micro Computer shares slumped 13% in extended trading on Tuesday after the server maker reported earnings that missed expectations, issued a low profit forecast and announced a surprise decline in adjusted gross margin as the costs of switching to more expensive AI chips weighed on the bottom line.

• The stock broke below a descending triangle last month, and the price closed below the closely watched 200-day moving average in early August.

• Super Micro Computer shares could find support at key chart levels such as $496, $357 and $260.

Super Micro Computers (SMCI) shares fell more than 13% in extended trading on Tuesday after the server company reported quarterly results that missed expectations, issued a low profit forecast and disclosed a surprise decline in adjusted gross margin as the costs of switching to more expensive artificial intelligence chips weighed on the bottom line. The company also announced a 1-for-10 stock split, effective Oct. 1.

Investors have driven up the company’s stock in recent years, betting that its servers will run Nvidia’s (NVDA) graphics processing units (GPUs), which are seeing insatiable demand amid the widespread adoption of AI models and applications. But the stock has recently traded about 48% below its March record close as analysts raise concerns about order uncertainty caused by the server maker’s shift to Nvidia’s more expensive next-generation Blackwell AI chips.

Below, we take a closer look at Super Micro’s chart, using technical analysis to identify key price levels that investors are likely to keep an eye on following the stock’s forecast earnings-related decline.

Breakdown of the descending triangle

Since hitting a record high in early March, Super Micro shares fluctuated in a descending triangle for four months before breaking out of the bearish chart pattern last month. The downtrend continued into early August, with the price falling below the closely watched 200-day moving average (MA) and forming a doji, a candlestick pattern that expresses indecision among buyers and sellers, ahead of the company’s quarterly earnings release.

Importantly, the stock recorded its highest trading volume since late June on Tuesday, suggesting repositioning by larger market participants to manage volatility risk following the earnings release.

Watch these levels for profit-oriented sales

With an expected earnings-led pullback in super-micro stocks, investors should keep an eye on three key spots on the chart that could provide support.

The story goes on

The first price is $496, an area where the stock could attract buying interest around the close on January 29, which would fill a gap in the early phase of the impulsive price increase between late January and mid-February.

Failure to hold this level could result in a decline to around $357, an area where shares could find support near a horizontal line connecting the August 2023 and January 2024 swing highs.

Finally, a more significant correction could lead to a retest of the $260 region, which is currently around 58 percent below Tuesday’s close. There, the price would likely find support from a trendline connecting the June 2023 swing high to a series of comparable trading levels on the chart between August and December last year.

Super Micro shares fell 13% to $535.00 in after-hours trading Tuesday.

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