The Dreaded Cramer Curse Strikes Super Micro Computer (SMCI) Just Ahead of NVIDIA’s Earnings

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

Super Micro Computer shares (NASDAQ: SMCI) were on course to eclipse Tesla’s blistering 3,413 percent rally recorded in the 29 months between 2019 and 2021, pumped by the ongoing mania on steroids around everything AI-related. Yet, this speculative frenzy appears to have been slayed by that sword of Damocles for the modern-day stock market trader – the dreaded Cramer curse that ensues almost every major endorsement by CNBC’s Jim Cramer.

Cramer’s ability to parrot the market’s consensus view is legendary. Unfortunately, his roving eyes tend to land on a particular stock only when the laws of gravity are about to exert their influence, equipped with all of the self-righteousness that must necessarily accompany the market’s senile tendencies.

Super Micro Computer’s Explosive Rise

Just around 1 year ago, Super Micro Shares were trading at a price of around $88. Last Thursday, the stock eclipsed the $1,000 price level, corresponding to gains of over 1,000 percent!

At the heart of Super Micro Computer’s blistering rally is the stock’s close association with the darling of the AI world – NVIDIA. To wit, SMCI’s biggest client is NVIDIA, and its second-biggest client is an entity that is backed by NVIDIA.

For the benefit of those who might not be aware, Super Micro Computer manufactures high-performance servers, which are in high demand right now, given the ongoing gold rush to train and deploy AI-powered solutions for diverse products and services.

As this AI-driven rally in Super Micro Computer shares entered its “blow the lid off” phase in January 2024, the Fintwit community started drawing parables with Tesla’s blistering rally in 2019 – 2021, when the high-flying EV stock registered gains of 3,413 percent in just 29 months. If SMCI had managed to close at the $1,300 price level, it would have eclipsed Tesla’s record. Alas, this was not meant to be.

Jim Cramer Wrecks the Party

Last week, the CEO of Super Micro Computer gave a series of high-profile interviews, including to Jim Cramer in his Mad Money show on CNBC. On Friday, the Cramer curse demanded its pound of flesh, when the high-flying stock tumbled around 20 percent, or $200, to close at the $803.32 price level. Even so, the stock is still up 812 percent over the past year.

Samantha LaDuc recently gave an interesting play-by-play commentary on what happened with Super Micro Computer last week. Basically, the stock experienced a gamma squeeze on the back of soaring activity in 0DTE (zero-day-to-expiration) options, where traders buy deep out-of-the-money calls, prompting dealers to hedge their exposure by buying up the underlying stock, resulting in a vicious feedback loop.

“Check out the Open Interest. On first glance, I see a good amount of contracts. Then I move my tired eyes to the left and notice THE TOP TEN STRIKES OF ALL OPTION EXPIRIES WILL COME OFF THE BOARD FEBRUARY 16, 2024.”

As noted by LaDuc, the gamma squeeze came crashing down on the 16th of February when much of the bullish open interest vis-a-vis Super Micro Computer expired, prompting dealers to unwind their hedges by dumping the stock. Unfortunately for Cramer, this activity coincided with his ill-fated endorsement of SMCI, which has only strengthened the belief in the dreaded Cramer curse.

In hindsight, SMCI’s rally was clearly unsustainable.

On Friday, desperate traders bombarded the WallStreetBets forum with pleas aimed at the financial “whales” to rescue their underwater positions.

NVIDIA’s Earnings to Determine SMCI’s Fate

The fate of Super Micro Computer’s rally now rests in NVIDIA’s hands. The GPU maker is slated to announce its earnings later this week. Currently, traders are expecting the stock to register an 11 percent move in its earnings aftermath.

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