The Russell 2000’s Biggest Holding: Super Micro Computer

The Russell 2000 has, guess what, 2000 stock components and the biggest, most heavily weighted one is one of the most volatile stocks around: Super Micro Computer SMCI . Hot money discovered it months ago and the buying and selling has been frenzied and maniacal at times in both directions. That it’s considered an “AI” stock helped.

It may have been a small cap once but with a market capitalization now of $41.78 billion, the computer hardware maker is either big or on the verge of bigness. Friday’s price drop after the company announced it would skip an earnings “pre-announcement” took the market cap lower as the price sank in one session by 23%.

Here’s the daily price chart:

From about $250 in early January to the peak of just over $1200 in March, it’s been an extraordinary stock to follow. That would have been a 380% gain for anyone lucky enough to have purchased at the beginning of the year and to have sold just after the first week of March.

Price chart analysts who follow these movements closely noticed the huge negative divergence of the relative strength indicator: as the price shot higher, the RSI dropped lower. The red-dotted lines from February to March indicate how the 2 differed.

Super Micro Computer on Friday took out the mid-March support level of just above $850 as it gapped down and closed at $713, well below what had been an up trending 50-day moving average. This price chart shows crazed, impulsive trading and demonstrates the madness of crowds.

The weekly price chart looks like this:

It almost looks like the price chart of one of those nutty cryptocurrencies. You could have purchased the stock for less than $100 up until early 2023. The red-dotted line shows the peak price of $350 — the peak before the 2024 breakout to much higher ground. The buying volume was very heavy when it took off.

The point-and-figure chart for Super Micro Computer is here:

I’m including this chart because it clearly shows the remarkable extent of the rally and the subsequent sell-off. The different perspective gives a glimpse of the volatility and the drama.

Note that the stock traded at just $35 for a brief time in mid-2022 and reached as high as $1220 just a few weeks ago before the selling wave that’s taken it back to $713.

Super Micro Computer represents 1.48% of the Russell 2000 by weight. Has it affected that small cap ETF with its volatility lately?

Here’s the daily price chart, you be the judge: