Super Micro Stock May Benefit as Cooling Demand Takes Off

Key Points

• Meta is expanding its data center footprint, leaving companies like Super Micro Computer to grab new contracts for its liquid cooling system service.
• Institutional buyers recognize this scenario as a possibility and have upped their stakes.
• A high short interest could quickly turn this stock into a short squeeze play with plenty of upside left.

Most companies in the technology sector are now beginning to recognize the importance of having the right footprint and infrastructure in place for their data center capacity. As the demand for artificial intelligence and cloud computing has skyrocketed and continues to rise, this has become an undeniable theme in the industry.

For this reason, making the cost of running data centers as efficient as possible will also be a theme that investors won't want to miss, since the success of most of the technology and its infrastructure relies on this achievement. With this in mind, investors can look to one of the leading names in bringing this cost down through its industry-leading liquid cooling system for data centers.

That company is Super Micro Computer Inc. NASDAQ: SMCI. This stock has surprised many investors over the past couple of years in terms of volatility and overcoming most (if not all) of the negative media that came its way while driving the stock price lower. Even after a stellar recovery, however, there is still ample room for this name to trend higher.

Super Micro Computer May Have a New Customer

One of the latest technology players to announce its expansion in the data center space is Meta Platforms Inc. NASDAQ: META. Considering the sizable need this behemoth may have for data centers, this could be enough of a tailwind for investors to start building into their potential buying thesis.

However, one assumption needs to be made here: Meta will choose Super Micro Computer as its provider of cooling services for these new data centers, especially as the toll these centers take on the energy grid becomes a concern.

That being said, investors can judge the likelihood of this happening based on Super Micro Computer's recent price action. Over the past month, this stock has already delivered a net rally of up to 21.7%, which also brings its quarterly run to a very aggressive 66.7%.

Since markets are forward-looking, it isn't too far-fetched to believe that the expectation lies in Meta ultimately choosing Super Micro Computer as its efficiency provider in these new data centers. Still, plenty more indicators serve as evidence to support the potential scenario that is playing out.

Clues in The Market for Super Micro Computer Stock

Not only is the price action bullish enough to justify this belief, but another month like this could turn Super Micro Computer stock into the next short squeeze story. A short squeeze is an event in which short sellers are forced to close their positions at a loss, resulting in buying the underlying stock and creating additional buying pressure.

Considering that up to 19.4% of Super Micro Computer's short float is held in short positions, ranking up a dollar value of as much as $4.7 billion, most of this balance could be redeemed in buying activity if the stock delivers another double-digit month of upside.

If a short squeeze happens, investors will likely notice Super Micro Computer reaching its previous 52-week high of $96.3 per share. Considering that high benchmark, today's price represents only 55% of the 52-week high, falling significantly behind other peers in the industry.

That wide gap in performance could allow this potential short squeeze to push Super Micro Computer stock back to such highs, especially if the market is right in its assumption that Meta will contract the company for its new data centers.

This will likely happen, since other major players in the data center space, such as NVIDIA Co. NASDAQ: NVDA, have already been working with Super Micro Computer for these services. 

Considering this potential, there is also one last gauge to believe in this development.

Because of the bullish price action and the fundamental developments, some institutional investors decided that this might be the right time to boost their holdings in Super Micro Computer stock, such as the Public Employees Retirement System of Ohio, which raised its stake by 4.7% as of early July 2025.

After that new allocation, the group now holds up to $7.9 million in Super Micro Computer stock, a decision that likely underwent a lot of scrutiny and analysis to be justified. Retail investors can take a page out of that book for their own portfolios today.