Super Micro faces nearly 30% weekly loss amid growing AI server rivalry
Super Micro (SMCI) stock plunged more than 26% this week, extending the stock’s long streak of volatility as investors weigh the company’s AI-fueled growth against questionable accounting practices, growing competition, and macroeconomic uncertainties.
Super Micro stock’s drop partly erased gains from a three-week rally beginning at the start of February, News.Az reports, citing foreign media.
That rally was fueled by the server maker’s ambitious long-term revenue outlook and investors’ optimism that the company would mitigate the risk of a Nasdaq delisting by submitting its delayed filings to the US Securities and Exchange Commission.
Super Micro Computer makes massive server racks designed by Nvidia (NVDA) using the chipmaker’s GPUs (graphics processing units, or AI chips) for data centers, and that hardware is necessary to train and run artificial intelligence models. The company was part of a group of leading AI-themed stocks that thrived as artificial intelligence went mainstream following the launch of ChatGPT.
That’s because Super Micro was an early mover in the burgeoning market for AI servers, Wedbush analyst Matthew Bryson told Yahoo Finance. The company partnered with Meta (META) to make the large-scale GPU servers that powered its first AI Research SuperCluster before ChatGPT debuted, Bryson said.
“ Super Micro was the right company at the right time,” Bryson told Yahoo Finance in an interview Friday. "They were in the right product at the right time, and they turned that into a leadership position in AI servers."
But a Hindenburg report in August accused the server maker of accounting violations, and the fallout from the report — Super Micro faced an investigation from the US Department of Justice and its accountant resigned — rocked the stock, with shares dropping roughly 24% from the time the accusations were released through the end of 2024.
Shares had recovered those losses by mid-February — before this week’s rout.
Super Micro submitted delayed quarterly and annual filings to the US Securities and Exchange Commission on Wednesday. While the details in the company’s earnings results were in line with expectations, Super Micro said in its annual 10-K report that it’s still working to resolve “material weaknesses and deficiencies in our internal control over financial reporting and disclosure controls and procedures.”
It’s not the first time Super Micro has faced such issues. Its former CFO was charged by the SEC in connection with “widespread” accounting violations in 2020. Bryson wrote in a recent note to investors that he believes "SMCI's second flirtation with questionable financials will necessarily continue to weigh somewhat on the company's perceived risk profile.”
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