Shares of AI server maker Super Micro Computer (SMCI) fell 15% on Thursday after The Wall Street Journal reported that the company is under investigation by the US Department of Justice.
The Journal, citing anonymous sources, said the DOJ is investigating the company for possible accounting violations. The issue was first exposed by short selling firm Hindenburg Research in August in a report accusing Super Micro Computer of “blatant accounting warnings,” as well as “undisclosed related party transactions” and “sanctions and failed export controls’. ”
Super Micro declined to comment on the matter.
Super Micro makes AI server equipment that uses Nvidia’s GPUs, and Wall Street analysts believe it is a major supplier of hardware to Meta. The company boomed in early 2024 as the tech industry created a slew of AI software with increasing power needs – and with it demand for products like Supermicro’s. It’s one of the AI-powered stocks that has soared to record levels, and even with Thursday’s drop, shares are still up 57% from last year.
The profits earned the company a spot in the S&P 500 early this year. But the stock has fallen from a high above $1,200 in mid-March before it was included in the index. Shares fell in early August when the company failed to meet Wall Street’s high expectations in its fourth-quarter earnings report, and again later in the month when the company delayed the filing of its annual 10-K report with the SEC.
Citing both the damning Hindenburg report and Super Micro’s delayed filing, CEO Charles Liang wrote in a letter to customers on September 3: “None of these events impact our products or our ability and ability to deliver innovative IT deliver solutions you trust. Our production capabilities remain unaffected every day and continue to operate at speed to meet customer demand.”
The company in August reported fourth-quarter earnings per share of $6.25, lower than the $8.25 analysts expected. Revenue of $5.3 billion came in just shy of Wall Street’s estimate of about $5.32 billion, but more than doubled from the previous year.
Liang said in his letter: “[W]We do not expect any material changes to our financial results for the fourth quarter or fiscal year 2024.” Still, JPMorgan analyst Samik Chatterjee recently downgraded the stock from Overweight to Neutral, nearly cutting his price target in half from $950 to $500. $373 Thursday before recovering to around $400 in the afternoon.
Nearly 37% of Wall Street analysts still recommend buying the stock as of Thursday afternoon, according to Bloomberg’s consensus estimate. Analysts see the shares rising to $685 in the next twelve months.
Laura Bratton is a reporter for Yahoo Finance.
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