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Higher memory costs stemming from the AI data center boom caused Apple's product profit margins to contract last quarter.
Credit: Eric Thayer / Bloomberg via Getty Images

Key Takeaways

• Smartphone shipments declined in the first quarter, a trend that's expected to continue this year as soaring memory costs force price hikes and weigh on consumer demand.
• Demand for memory and data storage hardware has soared over the past year due to the feverish AI data center buildout.
• Consumers buying lower-end models are expected to feel the most pressure this year, with premium phone makers such as Apple relatively insulated by their supply chain leverage and pricing power.

The AI-driven memory shortage may show up in smartphone prices soon.

Executives at Arm Holdings (ARM) warned on the chip designer’s earnings call Wednesday evening that smartphone demand could decline this year as a memory shortage pushes up prices. “We're going to continue to see very flattish, maybe slightly negative numbers for the overall market,” said CEO Rene Haas of smartphone volumes this year. 

Counterpoint Research estimates global smartphone shipments declined 6% in the first quarter as the memory shortage “disrupted supplies and increased costs” for manufacturers. According to International Data Corporation, which estimates shipments fell 4%, last quarter’s decline broke a 10-quarter growth streak for the smartphone market.

Why Is This Important

The AI data center boom has caused demand for a variety of industrial inputs and products, ranging from Nvidia GPUs to electricity, to surge. The most pressing bottleneck today—a memory shortage—is expected to eventually spill over into consumer electronics prices.

“This decline in shipments is primarily driven by memory players prioritizing AI data centers over consumer electronics,” which has compressed smartphone makers’ margins and forced them to raise prices to offset higher component costs, said Counterpoint senior analyst Shilpi Jain. 

The prices of digital memory and data storage hardware have soared over the past year due to surging demand from AI data centers. Flash memory supplier Sandisk (SNDK) last week reported its sales to data centers tripled quarter-over-quarter. Tech giants, eager to get a leg-up on their competition in the AI arms race, are paying hefty premiums to secure memory supply. Sandisk and memory peers such as Micron (MU) and Western Digital (WDC) are following the money, and that’s padding their bottom lines. Sandisk’s profit margin was 78% last quarter, up from 51% in the fourth quarter of 2025 and 23% a year prior. 

The shortage hasn’t affected all smartphone makers equally. “In several emerging markets, prices have risen by as much as 40–50%, significantly weighing on demand in price‑sensitive regions,” said Nabila Popal, senior research director for Worldwide Consumer Devices at IDC. Chinese smartphone maker Xiaomi saw shipments decline nearly 20% due to "its heavy exposure to the price-sensitive entry-level segment," according to Counterpoint.

Apple (AAPL), on the other hand, sold 3% more iPhones last quarter than the prior year, according to IDC estimates. The company last week reported iPhone revenue increased nearly 22% in the first quarter. 

Granted, Apple isn’t impervious to higher memory costs. CFO Kevan Parekh on the company’s earnings call last week attributed its narrowing profit margin on products to “a seasonal loss of leverage and higher memory costs.” But its “ultra-premium positioning and highly integrated supply chain,” are helping to take the edge off, according to Counterpoint. 

Bank of America analysts last week said Apple could offset memory costs by raising prices on its next batch of high-end iPhones, which already start at $1,100. The iPhone, they said, is “a relatively price inelastic product,” meaning Apple can raise prices without meaningfully hurting demand. 

Analysts don’t expect the memory shortage or its pressure on smartphone sales to let up soon. “The outlook for 2026 remains weak, as the memory crunch may last until late 2027,” according to Counterpoint. 

Memory troubles could even reshape the smartphone market over the next couple of years. IDC expects the memory shortage to accelerate the market’s drift toward high-end models with higher prices and wider margins. “The premiumization trend will continue even as the memory prices are expected to stabilize by the second half of 2027,” IDC analysts wrote. 

Paul Tudor Jones says these are "crazy times" in markets.
Credit: Adobe Stock

When will the music stop for the AI trade? Maybe not before the "crazy times" have passed.

The renewed investor taste for chip makers and companies supplying materials and equipment for data center builds has driven the S&P 500 and the tech-heavy Nasdaq Composite benchmarks to new records lately. Investor appetite for anything to do with artificial intelligence has even pushed companies with ostensibly little to do with it— like struggling sneaker makers—to pivot toward the trend. And hedge fund billionaire Paul Tudor Jones, of Tudor Investment Corp. is buying— at least for now.

WHY THIS MATTERS TO YOU

Though AI stock valuation concerns were more dominant last year, some expert investors are still warning of a possible bubble in AI stocks.

"I bought more AI stocks," Jones told CNBC on Thursday, saying he invested in a basket of them rather than choosing winners or losers. These, he said, are "crazy times" reminiscent of the period right before the Dotcom Bubble burst.

Jones likened the current vibe —marked, he said, by the January debut of Anthropic's Claude Code tool—to when Microsoft in 1981 rolled out MS-DOS 1.0 for IBM's personal computer, citing beginning of what he called "productivity miracles."

A massive efficiency boom has yet to materialize in the AI age, but investors are excited about the prospects, and picks-and-shovels companies' are benefitting—they're showing outsize growth this earnings season—from mega tech companies spending to build out their capabilities. That's continued to lift tech shares to highs, placing investors in a precarious position where they may wonder constantly just how much further things can climb.

Indeed, Jones warned that the AI trade won't rally forever, saying it likely had "another year or two to run." After that, he said, investors are likely to see "one of those breathtaking corrections." Jones has seen those before, too: He made his fortune shorting the 1987 stock market crash.

Conservative critics of the new bill say it further complicates the tax code.
Credit: South Agency / Getty Images

Key Takeaways

• A proposed Senate bill would eliminate federal income tax for individuals earning $46,000 or less.
• The bill would fund these tax cuts by introducing higher tax rates for individuals earning over $1 million.

A bill recently introduced by Senate Democrats would eliminate federal income taxes for individuals earning $46,000 or less and lower them for those making up to $80,500.

The Working Americans' Tax Cut Act, introduced March 12 by Sen. Chris Van Hollen, D-Md., and Sen. Mark Kelly, D-Ariz., has 19 Senate cosponsors. Rep. Don Beyer, D-Va., has introduced a companion bill in the House. It would create an alternative maximum tax that caps the tax liability of low- and middle-income earners.

To fund these tax cuts, the bill would establish new marginal tax rates for those earning more than $1 million.

What This Means For You

The new Senate bill would cut taxes primarily for middle-income earners and tax millionaires to offset the cost. The bill was recently referred to the Senate Committee on Finance, but it would need to pass both chambers and be signed by the president.

“Far too many Americans are working hard for their paychecks but still having trouble making ends meet. These Americans who are earning just enough to get by ... should not have to pay a federal income tax,” said Sen. Chris Van Hollen (D-MD) in a press release.

The alternative maximum tax would set an exemption—$46,000 for single filers, $92,000 for joint filers—and cap the tax owed on income above that exemption at 25.5%. Single filers earning less than $46,000 would owe no federal income tax.

The alternative maximum tax would work in tandem with the existing taxation system. "A filer would compute their tax under both the standard tax schedule and the alternative maximum. If the alternative produces a lower figure, they pay that amount instead," according to an analysis by the Yale Budget Lab.

Here's how that would work. Take a single filer earning $66,000. Under the bill's cap, they would subtract the $46,000 exemption from their income, leaving $20,000. Their tax bill would be capped at 25.5% of that amount: $5,100.

Under the present system, the same filer would subtract the $16,100 standard deduction, leaving $49,900 in taxable income, and owe about $5,800 based on the 2026 marginal brackets. Because that exceeds the $5,100 cap, they would pay $5,100, saving about $700.

The right-leaning National Taxpayers Union called the changes overly complicated. "The alternative minimum tax is the kind of confusing mechanism that legislators should be working to excise from the tax code," its analysis argued.

Not every filer would qualify for the cap. Only filers with incomes below 175% of the exemption ($80,500 for single filers) would qualify.

"This provision would benefit relatively few people among the poorest 20 percent or richest 20 percent of Americans and would mainly benefit the middle 60 percent," according to an analysis by the Institute on Taxation and Economic Policy, a left-leaning think tank. "Many people among the poorest 20% would not benefit because their income tax liability is already zero."

The bill would offset most of the cost through a new surtax on millionaires. The Tax Foundation estimates the alternative maximum tax would reduce federal revenue by about $1.6 trillion over a decade, while the surtax would raise about $1.5 trillion, leaving a net cost of $86 billion over 10 years.

Single filers earning more than $1 million would pay an additional 5% on income between $1 million and $2 million, 10% between $2 million and $5 million, and 12% on income above $5 million.

Arm shares closed at a record high Wednesday ahead of the company's earnings report.
Credit: Samuel Boivin / NurPhoto / Getty Images

Key Takeaways

• Arm shares slumped Thursday despite earnings that topped estimates, as the chip designer warned of weakness in the smartphone market.
• The company is looking to expand its business by selling its own AI chips.

Chip designer Arm topped analysts' estimates with its latest quarterly results, but shares are tumbling after the company warned of weakness in the smartphone market.

Shares of Arm (ARM) were down 5% in recent trading, after CEO Rene Haas said during Wednesday's earnings call that the company saw a "flip to negative" in unit growth for the smartphone market last quarter. The smartphone industry has been pressured in recent months by rising prices for memory components, which Haas said could continue, according to a transcript provided by AlphaSense.

Smartphones are a key market for Arm, as the company's primary line of business has been licensing chip designs to other companies for use in phones. The U.K.-based chip designer has taken steps to diversify its business, announcing plans in March to sell its own chips to be used in AI data centers.

Why This Matters to Investors

Though Arm beat Wall Street analysts' expectations, investors may have wanted more from the chip designer. Thursday's slump comes after a strong runup for the stock, which closed at a record high ahead of Wednesday's report.

Arm said it now sees up to $2 billion in demand for its AI chip through 2028, double what it forecast when announcing the chip in March, and maintained its $15 billion revenue target for the new chip sales business by 2031. The company held its revenue forecast steady, and said it is working to ramp its supply capabilities to meet demand for its new AI chip.

The Nvidia (NVDA) partner reported $1.49 billion in sales and adjusted earnings of 60 cents per share for the fiscal fourth quarter. Both figures came in narrowly ahead of analysts' estimates compiled by Visible Alpha.

William Blair analysts suggested investors may be concerned about "the lack of near-term upside," though they said they view "significant revenue opportunity over the coming years as the company expands into fast-growing and strategic CPU product market." They suggested it could take until the fourth quarter of Arm's current fiscal year for its AI chips to contribute to revenue.

Even with Thursday's pullback, Arm shares have roughly doubled in value since the start of the year, amid a broader rally for makers of AI hardware. They closed at a record high Wednesday ahead of the company's earnings report.

News of the day for May 7, 2026

Stocks surged to record highs Wednesday amid optimism that a deal could be reached to end the Iran war soon.
Credit: Spencer Platt / Getty Images

Stock futures are treading water this morning as investors await the latest news on a potential peace deal with Iran and digest a slew of earnings reports; oil prices are falling again this morning amid optimism that the Strait of Hormuz could reopen soon; Arm Holdings shares are falling after the company cited a lack of supply and declining smartphone demand in its latest earnings report; shares of McDonald's and Shell are gaining ground after their earnings topped Wall Street estimates; and DoorDash shares are soaring after the food delivery platform reported solid results and issued a rosy outlook for orders. Here's what you need to know today.

Stock Futures Little Changed After Two Days of Record Highs

Stock futures are little changed Thursday morning, as the rally that sent the S&P 500 and Nasdaq to new record highs in the last two days slows. Futures tied to the Dow Jones Industrial Average and S&P 500 were up 0.1% recently, while Nasdaq futures hovered near unchanged. The major indexes surged yesterday amid optimism over a potential deal to end the Iran war and solid earnings reports from several big-name companies. Crude oil futures continued falling as investors tracked the developments in the Middle East (more on that below). Gold futures were up more than 1% at $4,750 an ounce, while bitcoin was trading at $81,000, after hitting its highest point in over three months yesterday at $82,800. The yield on the 10-year Treasury, which affects interest rates on all sorts of loans, ticked lower to 4.33%, after hitting its highest point of the year at 4.50% last Friday.

Oil Prices Keep Sliding Amid Hopes for Iran War Deal

West Texas Intermediate futures, the U.S. crude oil benchmark, were down more than 3% to $92 per barrel. Oil prices have dropped this week amid reports that the U.S. and Iran are making progress toward a deal to end the war. While Iran is reportedly reviewing the latest proposal from U.S. officials to end the war, President Trump has made threats of more bombings against Iran if the country doesn't agree to a deal soon. Trump said yesterday that the U.S. blockade will remain active around Iran's ports until a deal is agreed to, but said the U.S. would abandon its day-old effort to guide ships through the Strait of Hormuz after the plan drew threats from Iran.

Arm Stock Drops Despite Solid Results

Shares of Arm Holdings (ARM) are losing ground in premarket trading after the chip designer reported fiscal fourth-quarter results that came in narrowly ahead of estimates last night. Arm reported $1.49 billion in sales and adjusted earnings of 60 cents per share. The company said it is working to ramp its supply capabilities to meet the billions of dollars worth of demand currently in the market for hardware to power AI data centers. Executives also noted that smartphone chip demand, a key industry for Arm, declined in the quarter as high memory costs raise prices for the phones, pressuring sales projections. Arm shares were down 8% ahead of the opening bell, after closing at a record high yesterday amid a rally for chip stocks.

McDonald's, Shell Lead The Way On Another Busy Earnings Day

It's another busy day of earnings, with reports out from McDonald's (MCD), Shell (SHEL) and many other noteworthy companies. Shell shares were down nearly 2% in recent premarket trading despite a better-than-expected report from the energy giant, as the company was forced to cut production in the quarter even as volatility caused by the Iran war boosted its trading operations. McDonald's shares were up 3% after the fast-food chain posted first-quarter results that beat analysts' estimates. Among the other big names reporting this morning: Shake Shack (SHAK), Peloton (PTON), Datadog (DDOG) and Tylenol maker Kenvue (KVUE). After the closing bell, results are due from Airbnb (ABNB), CoreWeave (CRWV), Coinbase (COIN) and Expedia Group (EXPE), among others.

Doordash Rallies on Solid Earnings, Order Outlook

Shares of DoorDash (DASH) are surging this morning after the food delivery platform topped first-quarter profit estimates, and gave a bullish outlook for orders in the current quarter. DoorDash reported $4.04 billion in revenue, just below estimates, on gross order volume (GOV), or the total value of products bought through DoorDash, that topped estimates at $31.6 billion. Earnings per share also beat the analyst consensus at 42 cents. For the current quarter, DoorDash projected GOV of $32.4 billion to $33.4 billion, above what analysts were expecting heading into the report. DoorDash shares were up 10% ahead of the opening bell.

Job creation in line with forecasts could signal the job market is staying resilient in the face of several shocks.
Credit: Michael Nagle / Bloomberg / Getty Images

Key Takeaways

• U.S. employers likely added 55,000 jobs in April, a deceleration from the unusually high 178,000 created in March, according to forecasts.
• The April report could shed light on whether the job market is truly breaking free from the tariff-related slump that predominated in 2025.
• Tax cuts and the Federal Reserve's rate cuts last year are encouraging job growth, while soaring gasoline prices could drag it down in the coming months.

The nonfarm payrolls report will show whether March's burst of job creation was the beginning of a turnaround for the labor market, or just another hill in the roller coaster of economic data that has consistently surprised experts of late.

The report from the Bureau of Labor Statistics, due early Friday, is likely to show U.S. employers added 55,000 jobs in April, down from the unexpectedly high 178,000 jobs created in March, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. The unemployment rate is expected to stay at 4.3%, relatively low by historic standards.

Since last May, the economy has alternately added and lost jobs every month while just about breaking even in the wash, and surprising forecasters with each sudden reversal. Friday's report could shed light on whether the job market is truly bouncing back after a dismal 2025, when tariffs, the crackdown on immigration and uncertainty about trade policy combined to drag job creation to its lowest level outside of a recession in decades.

“After reassuring job gains in March, Friday’s report will be critical for determining whether those results were an anomaly or the beginning of a stronger trend for the labor market," Michael Linden, senior policy fellow at the Washington Center for Equitable Growth, a progressive think tank, wrote in a commentary.

What This Means For The Economy

Job creation in line with forecasts could signal the job market is staying resilient in the face of several shocks, the latest being soaring gasoline prices as a result of the Iran war.

Recent data has provided a few hints that March's upturn was no fluke. Unemployment claims hit their lowest level since 1969 last month, and hiring and quitting both accelerated in March, suggesting that the recent "no hire, no fire" trend could be easing up.

On the other hand, if the economy is getting over the tariff impact, a fresh shockwave is on the way from the Iran war. The conflict's disruption of oil supplies has driven up gas prices steeply, raising concerns that consumers could pull back on spending to afford fuel, ultimately causing a ripple effect that hurts the job market. Some forecasters expect unemployment to rise as soon as this summer.

"We are seeing a strange economy that is getting stranger because of the war," Dean Baker, senior economist at the Center for Economic and Policy Research think tank, wrote in a commentary. "The labor market weakening we saw through 2025 seems to have stopped and may have even reversed somewhat."

Baker is among the forecasters who expect healthcare to once again dominate job creation, noting that the sector has accounted for 146% of job growth over the last year. (That's not a typo, it means that the new healthcare jobs made up for losses in other industries.)

Other forces in the economy are providing a boost to spending and encouraging hiring, possibly overshadowing the drag from tariffs and the war. The Federal Reserve's interest rate cuts last year reduced borrowing costs, and easier money may only now be boosting the job market, as was intended. Fed officials often note monetary policy operates with "long and variable lags." And many households got a financial boost at tax time because of the One Big Beautiful Bill tax cuts.

"The economy entered the year riding tailwinds from tax cuts, higher public spending, and the Fed’s interest rate cuts in late 2025," Bill Adams, chief economist at Fifth Third Commercial Bank, wrote in a commentary. "These tailwinds have contributed to stronger hiring in the last few months."

GameStop is looking to expand its inventory—by acquiring eBay.
Credit: Brandon Bell / Getty Images

Key Takeaways

• GameStop's $56 billion offer for eBay is still on the table. Also on the table: a list of collectibles listed on eBay by GameStop's CEO.
• Bidders have quickly jumped on several of those items since they were promoted Wednesday. Taken together, the total price is above $80,000.

Ryan Cohen isn't just the guy who wants to merge with eBay. He's also a member.

And he's hoping for your cash. "I’m selling stuff on eBay to pay for eBay," Cohen wrote Wednesday on X just days after GameStop (GME), the retailer he runs, launched an audacious bid for online marketplace eBay (EBAY). His post include a link to an eBay page—the name on the profile is "ryan_5050"—currently showing 36 items for sale.

What are your options? Unsurprisingly, perhaps, they lean toward collectibles: You can bid on, among other things, a set of two GameStop store signs currently going for above $11,000, which have 90 bids; several vintage video games and baseball trading cards; and a black GameStop ballcap and mug, sold separately, each of which currently have bids in the quadruple digits. If you want it all, it will run you above $87,000 at recent prices. (And counting.)

There's an added inducement included with each item: Every one, the listings read, comes with a signed copy of Cohen's proposal to eBay "as a THANK YOU for your support."

Some observers have raised questions about the merits of GameStop's offer for eBay, the market value of which is around $46 billion. Though GameStop shares rose today, they're still below where they sat before the company announced its buyout bid.

But people who bid on Cohen's stuff may not have as much reason for worry. The feedback on his account—on items previously purchased, not sold, to be sure—is 100% positive.

I’m selling stuff on eBay to pay for eBayhttps://t.co/REaITX9iXr

— Ryan Cohen (@ryancohen) May 6, 2026

Oil futures tumbled on Wednesday following reports the U.S. and Iran are nearing a deal to end their two-month-old war.
Credit: Justin Sullivan / Getty Images

Key Takeaways

• Oil prices plummeted on Wednesday amid optimism the U.S. and Iran are nearing an agreement to end the war and reopen the Strait of Hormuz.
• U.S. gas prices, at their highest level since July 2022, are likely to take a while to moderate.
• Experts warn it will take months for global oil supplies to return to pre-war levels, and even longer for that normalization to pass through to prices.

Oil prices are plummeting again. Don't expect to see that at the gas station tomorrow.

The price of oil tumbled on Wednesday following reports the White House believes it is close to reaching an agreement with Iran that would end the two-month old war and set the stage for nuclear negotiations. West Texas Intermediate futures, the U.S. benchmark, were recently trading around $95 a barrel, down from yesterday’s high above $105. Brent crude, the global benchmark, recently traded for about $102 a barrel after climbing above $114 yesterday. (Read today's full markets roundup here.)

Meanwhile, the average price of gasoline in the U.S. ticked up 5 cents on Wednesday to $4.54 a gallon, its highest since July 2022. Only three states—Louisiana, Mississippi, and Oklahoma—have average gas prices below $4. Gas prices have risen more than 50% since the start of the war in Iran, driven higher by the shutdown of the Strait of Hormuz, through which about a fifth of the world’s oil and natural gas passed before the war. 

Why This Is Important

As of Wednesday, the average American is spending more for a gallon of gasoline than any time since July 2022, and 50% more than they did just two months ago. Higher prices for gas and diesel—major consumer and business costs—are likely to continue putting upward pressure on inflation and drag on the economy until they moderate.

Crude oil is the single largest determinant of gasoline prices, accounting for a little over half of what drivers pay at the pump, according to the U.S. Energy Information Administration. Experts warn that gas prices are likely to stay elevated throughout the summer without sustainably lower oil.

“Consumers may not see meaningful relief for a while,” wrote Bank of America economist Stephen Juneau in a note on Wednesday, who thinks gas could stay around $4 throughout the summer. 

Whether gas follows oil prices lower or continues to rise will depend on the outcome of negotiations to end the war and reopen the Strait of Hormuz. President Trump on Wednesday said on Truth Social that the U.S. would resume its bombing campaign “at a much higher level and intensity” if Iran did not accept the agreement to end the war and reopen the strait.

Even if the Strait of Hormuz reopens soon, experts say it will take months before traffic returns to pre-war levels. It could take longer for oil production in the Middle East to return to normal due to attacks on energy infrastructure and temporary oil well shutdowns.

Gas prices are notorious for moving much slower than oil prices, especially on the way down, which is why experts often say prices at the pump "rise like a rocket and fall like a feather." Crude oil prices declined 25% in the 10 days after the U.S. and Iran agreed to a ceasefire on April 7. Gas prices, meanwhile, fell less than 2% over the same period.

The U.S., as the largest oil producer in the world, is more insulated from the Strait of Hormuz closure than much of Asia and Europe, but those countries that have lost supply are scrambling to replace it, driving up demand and prices across the globe. U.S. crude and fuel inventories continued to decline last week as exports of refined petroleum products rose to a record high, according to the EIA.

Soaring gas prices have upped the financial pressure on U.S. consumers, especially those with the lowest incomes. According to Bank of America card data, more than 10% of lower-income households spent more than 10% of their monthly income on gasoline in March, up from 8% last year. That number likely increased last month as fuel prices continued to climb.

McDonald's shares are down about 7% year-to-date.
Credit: Anna Barclay / Getty Images

Key Takeaways

• McDonald's latest earnings report is due Thursday ahead of markets opening, with the stock seen potentially hitting its lowest point in nearly two years following the results.
• Sales and profits are expected to grow year-over-year, with analysts largely bullish on the fast food chain despite the stock's recent pullback.

McDonald's is scheduled to report earnings Thursday morning, with shares seen potentially sinking to their lowest point in nearly two years following the results.

Based on current options pricing, traders are anticipating McDonald (MCD) could move up to 3% by the end of the week. A move of that size from Wednesday's close could see shares rise near $294, recovering some of their recent losses, or slip to $275, their lowest level since August 2024.

McDonald's shares have slipped about 17% since closing at an all-time high of $341 in February amid worries about the impact on its business from the war in Iran. In the U.S., McDonald's has focused on value with deals, as well as plans to attract new higher-income customers. The chain is also reportedly preparing to launch new beverage offerings including energy drinks to draw in customers.

Why This Matters to Investors

Investors and analysts are likely to look to McDonald's results for insights into the health of the American consumer, and the performance of its recent value-focused promotions.

Oppenheimer analysts wrote recently that they see the stock's recent pullback as a buying opportunity, and that McDonald's has "multiple levers to drive healthier sales, margins, and earnings growth following 2 years of underwhelming results." UBS analysts said they are also bullish on McDonald's long-term outlook, while noting that sentiment around the stock has turned negative amid uncertainty about recent sales trends, and the impact of the Iran war on its international business.

Analyst estimates compiled by Visible Alpha forecast McDonald's will report first-quarter revenue of $6.47 billion, along with adjusted earnings per share of $2.74. The fast food giant is also seen reporting 3.7% growth in same-store sales, with 4% growth in the U.S.

Analysts are largely bullish on McDonald's stock, with seven "buy" and three neutral ratings among the ten analysts with current ratings tracked by Visible Alpha. Their average price target of $350 would suggest analysts see a full revery for the stock to new highs in the next 12 months.

Nvidia CEO Jensen Huang (left) and Super Micro Computer CEO Charles Liang during an event in June 2024, a few months before allegations of accounting improprieties sent Supermicro shares reeling.
Credit: Bloomberg / Contributor / Getty Images

Key Takeaways

• Shares of Super Micro Computer jumped on Wednesday after the server maker issued a rosy outlook for the current quarter.
• Wednesday's gains erased the stock's 33% drop in March following a Justice Department indictment of three associates, but JPMorgan analysts warned corporate governance issues will likely remain an overhang on the stock.

Things may be looking up for Super Micro Computer and its investors after a couple of painful years.

Super Micro Computer (SMCI) stock was up 15% in afternoon trading Wednesday after the AI server maker’s rosy outlook overshadowed its mixed quarterly results. 

Supermicro on Tuesday afternoon reported revenue in the first three months of the year totaled $10.2 billion, more than twice last year’s sales but $2 billion less than analysts expected. Adjusted profit, on the other hand, easily beat estimates after increasing about 170%. The company’s forecast of current-quarter sales and adjusted earnings both exceeded expectations. 

Why This Is Important

Super Micro Computer was one of the earliest beneficiaries of the AI data center boom that has fueled the bull market since late 2022. Its stock fell out of favor in 2024 amid accounting controversies, but it has remained a volatile AI data center play.

Wednesday’s jump put Supermicro stock at its highest level since mid-March, when shares lost one-third of their value in a day after the Justice Department charged three associates, including co-founder Yih-Shyan “Wally” Liaw, with conspiring to ship AI hardware to China in violation of export controls. The indictment did not accuse Supermicro of wrongdoing. 

JPMorgan analysts on Wednesday called the company’s results “encouraging,” pointing to its improving profit margins and strong demand environment. Nonetheless, “corporate governance remains a persistent overhang” preventing JPMorgan from getting fully on board with the stock.

Even before the smuggling indictment, Supermicro was haunted by controversy. In early 2024, the stock was an AI darling, riding high on its booming business with Nvidia (NVDA), whose chips it packages into servers for AI data centers. Shares quadrupled in value between the start of 2024 and mid-March of that year. 

AI jitters and a less-than-stellar earnings report took some of the luster off shares in the following months, but the stock’s troubles really started in August 2024, when short-seller Hindenburg Research accused Supermicro of accounting irregularities, and alleged the company rehired executives involved in a 2018 accounting scandal that it paid federal regulators $17.5 billion to settle in 2020. The next day, Supermicro delayed its annual report to review internal controls, and shortly thereafter the Justice Department opened an investigation prompted by Hindenburg’s report. 

By the end of 2024, Supermicro stock was down 75% from its all-time high earlier in the year, prompting Nasdaq to drop it from the Nasdaq-100 index just five months after it was added.

Shares have struggled to regain their momentum. Even with Wednesday’s jump, the stock is down slightly over the past year, compared with the S&P 500’s 30% gain. At $32, Supermicro shares are far cry from the record levels around $120 reached in March 2024.

The combination of Supermicro’s exposure to the AI boom and its various controversies have made the stock one of the S&P 500’s most volatile. The stock’s 1-year beta of nearly 2.9 is the third-highest in the benchmark index, behind only Coinbase (COIN) and Robinhood (HOOD), two companies whose shares often move in tandem with the highly volatile price of bitcoin. In the past year, shares have risen or fallen more than 10% on nine separate occasions.