The developments surrounding Super microcomputer (NASDAQ: SMCI) have become some of the most fascinating chapters in the broader story of artificial intelligence (AI).
At its peak, shares of Supermicro rose more than 300% earlier this year. However, starting in August, stocks began a prolonged sell-off of epic proportions.
It’s been a series of falling dominoes for Supermicro in recent months. But what if I told you that better days could be on the horizon?
I’m going to describe everything that’s happening at Supermicro and explain why the stock went into freefall. More importantly, I’ll also explore why Supermicro could be on the verge of a turnaround, and what that could mean for investors.
There have been so many ongoing storylines at Supermicro in recent months that it’s really hard to keep up with all the hoopla. Below is an annotated timeline of every speed bump Supermicro has encountered, and some details on the stock’s movement as a result.
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August: In late August, Hindenburg Research published a report on accounting malpractice protocols at Supermicro. Within one trading day after Hindenburg’s report became public, Supermicro’s shares plunged 19%. This was the first domino to fall. Exactly one day after the Hindenburg report was released, Supermicro filed an 8K announcing that the company “expects to file a notice of late filing” for its 10K annual report.
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September: About a month after the Hindenburg piece, The Wall Street Journal reported that the Department of Justice (DOJ) was investigating Supermicro for its accounting controls, following a series of whistleblower allegations. The Nasdaq stock exchange committees also sent Supermicro a notice explaining that the company was at risk of being delisted for compliance reasons.
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October: On October 30, it was announced that Big Four accounting specialist Ernst & Young LLP (“EY”) resigned as Supermicro’s accountant.
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November: Reports about this started circulating in mid-November Nvidia was diverting some of its Blackwell order flow away from Supermicro. To add some context, Supermicro specializes in the architecture for servers and storage clusters that house Nvidia’s graphics processing units (GPUs). With Blackwell expected to play a major role for Nvidia, Supermicro was well positioned to benefit from the huge tailwinds surrounding these GPUs.
While accounting fraud is a serious allegation, I would caution investors not to hit the panic button. It’s important to keep in mind that short sellers like Hindenburg have a vested interest in seeing the stock price fall. Furthermore, in light of all these obstacles in the road, Supermicro has taken some respectable steps to address the issues head-on and address them appropriately.
