Super microcomputer (NASDAQ: SMCI) stocks are seeing another big sell-off during Thursday’s trading. The server specialist’s stock price fell 10.3% as of 3:30 PM ET.
Supermicro is already struggling with accounting problems, delayed financial filings and other problems, and now it appears a major new competitor is entering the market. With its quarterly report and conference call yesterday, Cisco has announced that it plans to enter the AI server market.
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After the market closed yesterday, Cisco released results for the first quarter of the current fiscal year, which ended on October 26. Investors weren’t happy with the results and the company’s share price is down in today’s trading, but the networking giant is. surprises Wall Street by announcing it will enter the high-performance server market. That’s not good news for Supermicro.
Prior to its recent failures, Supermicro had a dominant position in the high-end server market tailored to artificial intelligence (AI) use cases. But after missed regulatory filings, auditor resignations and other sources of controversy, the company’s competitive position appears to be weakening at an alarming rate.
Reports have recently appeared about this Nvidia redirects orders for its industry-leading graphics processing units (GPUs) from Supermicro to other customers. Nvidia’s GPUs are the main hardware component in Supermicro’s servers. These processors currently have no comparable replacements, and the server specialist will take a major sales hit if access to these products is curtailed.
Prior to Cisco’s announcement that it would enter the AI server market, that seemed to be the case Dell would be the main recipient of Nvidia GPUs previously earmarked for sale to Supermicro. As new players enter the market, Supermicro’s importance as a customer for Nvidia appears to be declining. If so, that indicates significantly weaker sales prospects for the company.
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Keith Noonan has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Cisco Systems and Nvidia. The Motley Fool has a disclosure policy.
Why Super Microcomputer Stocks Are Plummeting Again Today was originally published by The Motley Fool
