Rising competition in the artificial intelligence server space could lead to a pullback in Super Micro Computer shares, according to Goldman Sachs. The firm downgraded Super Micro to sell from neutral and decreased its price target by $8 to $32, implying 24% downside over the next 12 months. The move comes as the stock has substantially outperformed the broader market year to date. Super Micro has risen 38.3% in that period, while the S & P 500 has slid more than 3%. “SMCI stock is up 38% year-to-date, making it the best performing stock in our Hardware coverage,” analyst Michael Ng wrote in a Monday note. “With the stock trading at 16X F2025E P/E, we view risk-reward as unfavorable given downside risks on valuation, competition, and gross margins.” SMCI YTD mountain SMCI, year-to-date Among one of the reasons for anticipated pullback, Ng said that AI server competition is heating up partially due to “less product differentiation following [research and development] investments from competitors in recognition of the large market opportunity.” As a result, Super Micro’s market share in the space will likely come under pressure, he added. “SMCI’s outlook for $40 bn in revenue in F2026 is predicated on a return to its leading market share position for upcoming GPU product cycles (e.g., Blackwell, Blackwell Ultra, Rubin) as components become available, which we believe will be difficult to achieve with more competition from both OEMs and ODMs relative to prior product cycles,” the analyst said. Additionally, that rising competition – as well as other catalysts like upfront investments in new features and a changing customer mix – could weigh on the company’s gross margins, Ng noted, specifically forecasting that its gross margins will decline to 12.2% in 2025 and 11.7% in 2026. A majority of analysts on Wall Street have stepped to the sidelines on Super Micro, a controversial stock because of its late financial reporting. Among the 14 covering the stock, only five have a buy rating, while eight have a hold rating, per LSEG data. However, its average target of about $53 still calls for gains ahead, implying more than 25% upside from Friday’s close. The stock fell more than 2% in the premarket Monday following Ng’s downgrade.