Super microcomputer(NASDAQ:SMCI) roared into the year with power as a leader in the fast-growing field of artificial intelligence (AI). The company makes a variety of equipment, such as servers and full-rack scale solutions, that are critical to AI data centers, and this has helped drive triple-digit revenue growth in recent quarters. The share price followed suit, rising 188% in the first half of the year.
But a series of problems that started with a short report in late August caused a drop in investor confidence – and a drop in the share price. Shares fell 22% in the four trading sessions following the brief report on accounting issues at Supermicro. They continued to decline as the company delayed filing its 10-K annual report and a 10-Q quarterly report and lost its accountant.
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However, since that news a few weeks ago, Supermicro seems to have turned things around. The company hired a new accountant to complete these files, and in the latest positive news, a special committee investigating Supermicro’s accounting practices found no evidence of fraud. Could Supermicro, now trading at bargain levels, be the biggest recovery story of 2025? Let’s find out.
Image source: Getty Images.
First, let’s look at Supermicro’s successes and problems over the past year. The company started 2024 on a strong note, reporting its first quarter of $3 billion, with revenue not exceeding full-year revenue until 2021. Demand from AI customers soared, and catalysts such as the launch of NvidiaThe new Blackwell architecture promised to help continue this momentum. Supermicro integrates chip designers’ innovations into its systems so that their new releases translate into growth for the equipment manufacturer.
Another win for Supermicro: The S&P500 invited the shares to join, showing that Supermicro had become one of the most important companies driving today’s economy. Finally, Supermicro’s shares soared so high — above $1,000 earlier this year — that the company announced a 10-for-1 stock split, with the new split-adjusted shares set to begin trading on October 1. stock price by issuing new shares to current holders, stock splits open up investment opportunities to a wider range of investors.
Then came the rough patch, launched by a brief report from Hindenburg Research that alleged “blatant accounting warnings” and other problems. Supermicro called the statements “false or inaccurate.” But the shares continued to fall as the company delayed its annual and quarterly reports and the auditor quit. This delay in reporting prompted the Nasdaq to send Supermicro a non-compliance letter, the first step towards a possible delisting.
Meanwhile, an independent special committee formed by Supermicro’s board reviewed former accountant Ernst & Young’s points and recently completed its mission. The special committee recommended the appointment of a new chief financial officer and the addition of executive-level positions to keep things on track given Supermicro’s rapid growth in recent times. But the committee found no evidence of fraud in its investigation.
Supermicro also recently said it has sent a compliance plan to Nasdaq and aims to file reports according to the exchange’s timetable. Importantly, the company said it does not expect any adjustments for the fiscal year ended June or prior fiscal years.
These two elements – the special committee’s conclusion and Supermicro’s compliance plan – are excellent news and show that the worst outcomes could have been avoided. I’m talking about findings of fraud, a delisting from the Nasdaq stock exchange and major financial adjustments.
That said, before we can really breathe a sigh of relief, it’s important to see the audited financial statements as soon as they become available. At this point, it’s too early to say that Supermicro is completely out of the woods. So even though Supermicro shares are trading at a bargain price of 14 times forward earnings estimates, it’s still risky to buy the stock today.
Now let’s get back to our question: Can Supermicro be the biggest recovery story of 2025? This will depend on the contents of those financial statements and whether they are filed according to the schedule requested by Nasdaq.
If Supermicro doesn’t meet these targets, its shares are unlikely to take off. But if the company pleases investors with its earnings and the Nasdaq with compliance, Supermicro’s shares could rise — and this AI equipment giant could become the biggest recovery story of the new year.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Supermicrocomputer sank in recent months amid financial reporting problems. Could stocks be the biggest recovery story of 2025? was originally published by The Motley Fool
