Super microcomputer (NASDAQ: SMCI) Shares lost ground over the last week of trading. The company’s stock price ended Friday’s session down 13.3% from the previous week’s close, according to data from S&P Global Market Intelligence.
Supermicro’s stock price fell last trading week after interest rate news from the Federal Reserve caused investors to shift their approach to stocks. As the Fed delivered the 25 basis point rate cut the market had been expecting, Chairman Jerome Powell made comments that spooked investors.
The Fed held its last meeting on Wednesday and implemented its third interest rate cut since September. This lowered the benchmark interest rate to 4.25%, down from the recent high of 5.25% first reached in July 2023. While higher interest rates are a way to fight inflation, they tend to create weaker performance for the stock market.
The Fed had previously indicated that it expected four interest rate cuts of 25 basis points each next year. At its meeting on Wednesday, the central bank authority said it now expects to make only two cuts of that magnitude in 2025. The change in outlook led to a round of major sell-offs, and companies with growth-dependent and speculative prospects saw excessive valuations. withdrawals. Supermicro’s share price was down as much as 16.3% in trading the week after the news, but the company managed to see some recovery.
On Friday, The Information published a report saying that the US Department of Commerce had opened an investigation into how NvidiaThe advanced graphics processing units (GPUs) used for artificial intelligence (AI) applications had ended up in China. Due to rising tensions between the two countries, the US has imposed export bans that prevent advanced AI processors and semiconductor manufacturing equipment from being sold to China.
According to the report, Nvidia has asked major server companies including Super Micro Computer and Dell to investigate potential pass-through sales that could have occurred to customers in Southeast Asia. The studies could reveal another major risk factor for Supermicro.
While nothing has been confirmed, there are rumors and rumors that China gained access to Nvidia’s high-end processors by purchasing Supermicro’s servers. Additional, The Wall Street Journal reported in October that the US Department of Justice had opened an investigation into Supermicro. While most speculation suggested that the reported investigation focused on possible accounting irregularities at the company, some investors suggested that an export ban violation could also play a role.
Supermicro says it will file its delayed 10-K report by Feb. 25 and the results will be scrutinized. If the company files a report that does not contain a substantial repeat of previously filed financial results, its stock price could rise. On the other hand, the stock could plummet if the company’s new financial auditor finds that previously reported results require significant downward revisions.
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Keith Noonan has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Why Super Micro Computers Shares Plummeted This Week was originally published by The Motley Fool
