Super Micro Computer's AI Server Business Thrives Amid Accounting Concerns

Should You Buy Super Micro Computer Stock After Its 1,480% Gain in 5 Years? Wall Street Has a Clear Answer for Investors. | The Motley Fool

Super Micro Computer (SMCI 11.62%) shareholders have been through a whirlwind lately. While the stock is up 1,480% in the last two years, it has also fallen over 70% from its record high in the last eight months. As one of Nvidia's largest partners, the server maker should benefit as demand for artificial intelligence (AI) infrastructure increases, but Supermicro has also been accused of accounting manipulation. Among the 12 analysts who follow the company, the median 12-month price target of $30.50 per share implies an 8% downside from its current share price of $33. That means six analysts think the stock will fall more than 8% in the next year. Additionally, 19 analysts followed Supermicro three months ago, meaning seven have recently discontinued coverage. Wall Street is clearly shying away from the company. Here are the important details. Super Micro Computer builds servers, including full server racks equipped with storage and networking that provide customers with a turnkey solution for data center infrastructure. Its internal manufacturing capabilities and "building block" approach to product development let it bring new technologies to market more quickly than its competitors, often by two to six months. Indeed, earlier this year, Rosenblatt analyst Hans Mosesmann wrote, "Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out." Those advantages have helped Supermicro secure a leadership position in AI servers, a market forecast to grow at 30% annually through 2033, according to Statista. Importantly, Supermicro is also the top supplier of direct liquid cooling (DLC) systems, which could help the company strengthen its position in AI servers. DLC systems reduce data center power consumption by 40% and occupy 80% less space than traditional air-cooled systems. AI servers generate more heat than general-purpose servers, so demand for DLC systems is expected to rise quickly. Indeed, while less than 1% of data centers have historically used liquid cooling, Supermicro estimates 15% (and maybe as many as 30%) of new data center installations will use liquid cooling in the next two years, and the company says it is positioned to "capture the majority share of that growth." As mentioned, while Supermicro shares are up 1,480% in the last two years, the stock has also nosedived more than 70% from its record high in the last eight months. Below is a month-by-month timeline detailing the events that led to that rapid decline in value. The situation is even more complicated than what I've just described because Supermicro was accused of similar accounting violations in the past. At that time, the company filed its Form 10-K for fiscal 2017 almost two years late and was fined $17.5 million by the Securities and Exchange Commission (SEC). Supermicro was also delisted from the Nasdaq Exchange for about 18 months, though shares advanced 73% during that period anyway. Supermicro shares could soar if the wrongdoings outlined by Hindenburg are found to be inaccurate and then nothing comes of the Justice Department probe. But investors should be at least a little skeptical, given that the SEC has fined the company for similar violations in the past, and Hindenburg says Supermicro has rehired three senior employees involved in the previous scandal. In that context, I think prospective investors should avoid this stock right now. There are simply too many unknowns to make an educated decision, which probably explains why seven out of 19 Wall Street analysts discontinued coverage during the last three months. It may also explain why the remaining 12 analysts have set the stock with a median price target that implies an 8% downside.

Super Micro Computer May Have Avoided a Major Risk. Is This Beaten-Down Stock a Buy?

Super Micro Computer (SMCI -8.74%) started the year with plenty of promise. The stock soared 188% in the first half, even beating market darling Nvidia, thanks to its dominance in the artificial intelligence (AI) equipment market. Investors piled into the stock as the company reported record demand for its data center equipment from AI customers -- and that resulted in triple-digit revenue growth. But troubling news started to pile up a few months ago, halting Supermicro's fantastic momentum -- and the shares plummeted. One major issue was the company's announcement that it would delay the reporting of its 10-K annual report, and this called into question its ability to remain listed on the Nasdaq. To make matters worse, Supermicro's auditor resigned in October, making it impossible for the company to proceed with its financial filings. Positive news arrived this week, though, sending the shares soaring and igniting investors' hopes for an exciting recovery story. Supermicro said it's hired independent auditor BDO U.S.A. and has submitted a compliance plan to the Nasdaq. With these moves, Supermicro may have avoided a major risk -- delisting from the Nasdaq. Does the news make this beaten-down stock a buy? Let's find out. An 800% gain over five years First, let's walk through the complete Supermicro story. The company, as mentioned, makes equipment like servers and workstations for data centers, and AI customers have been rushing to order as they build out their operations. This helped Supermicro report quarterly revenue this year that surpassed a full year of revenue as recently as in 2021. And this also has pushed the stock higher, not only in the first half but over the past few years -- it's climbed more than 800% over five years. Supermicro also works hand-in-hand with the biggest chip designers, immediately incorporating their latest innovations into its systems. This means the company could benefit from their successes too, such as Nvidia's upcoming Blackwell launch. But questions about Supermicro's financial reporting arose in recent months, weighing on the stock. Hindenburg Research released a short report, alleging "glaring accounting red flags" and other problems at the company. The Wall Street Journal then reported a Justice Department Probe into the company -- Supermicro and the U.S. attorney's office declined to comment. Finally, Ernst & Young resigned as Supermicro's auditor, citing concerns about the company's accounting practices. Meanwhile, Supermicro already had delayed its 10-K annual report -- and received a non-compliance letter from Nasdaq. Risk of a Nasdaq delisting The risk here is a delisting, meaning Supermicro shares would then trade over-the-counter (OTC). The problem with that is OTC markets have lower volume, making it more difficult to trade the stock. This clearly would weigh on appetite for Supermicro stock, limiting future gains. This week, though, with the hiring of a new auditor and the filing of a compliance plan, Supermicro may have eliminated this major risk -- if the company is able to follow through with the plan and submit its financial reports -- the 10-K annual report and a 10-Q report for the latest quarter -- in a timely fashion. In the filing, Supermicro said this is the goal, though it didn't offer a timeline. Supermicro said in the plan that it believes it can file "within the discretionary period available to the Nasdaq staff to grant." The stock will remain listed while the Nasdaq reviews Supermicro's plan. Is this dirt cheap stock a buy? So now let's get back to our question: Does this latest news make Supermicro a buy? It's true that, if we consider earnings so far and future prospects, the stock looks dirt cheap today, trading at about 8x forward earnings estimates. But the problem is, without the latest, audited earnings reports, we don't have a clear view of the financial picture. And that makes investing in Supermicro right now very risky. In order to set yourself up for a win in investing, it's crucial to understand a company's financial situation and have access to all of the latest earnings numbers. These will support your decision, so that you won't just bet randomly, hoping for the best. All of this means that right now, it's still too early to take a chance on Supermicro -- but that doesn't mean you should forget about this company either. Supermicro's products are sought-after, and future prospects look bright, so once we have more clarity on the financial situation, this stock could once again become a top long-term buy.

Super Micro Computer Stock Jumped Today. Here's What Investors Need to Know

A relief rally in Super Micro Computer (SMCI 15.81%) stock is back on track today after taking a breather on Wednesday. Shares of the artificial intelligence (AI) server stack provider exploded higher on Tuesday after the company announced plans to address corporate governance and accounting questions. That rally stalled yesterday with some investors taking profits as uncertainty remained regarding Supermicro's underlying business. But one clue that it remains on track came during the Nvidia earnings call yesterday. That helped reignite the rally today and send shares higher by 14.2% as of 2:25 p.m. ET. Supermicro stock has now jumped by 65% in a week, but the company still has work to do. Data center AI demand is "incredible" Supermicro has delayed filing its last two financial reports with the Securities and Exchange Commission (SEC) as it works to resolve accounting concerns. Its last auditor resigned, causing even more concern. As a result, Supermicro was on the verge of being delisted from the Nasdaq Stock Exchange. But the company delivered a plan to the exchange to remain listed and announced on Monday that it has hired a new auditor. The stock surged on that news, but questions remain. Investors still need to wait for the filing of the financial reports and the sign-off from the auditor. Even in a best-case scenario, Supermicro has said its sales would be lower than anticipated for the most recent two quarterly periods. That's understandable, though, as some customers may have wanted to avoid uncertainty related to orders. Data centers housing AI servers are under construction, and any equipment order delays would be costly. Nvidia CEO Jensen Huang said yesterday that demand remains "incredible" for its AI chips and platforms. And during Nvidia's earnings call for investors last night, Huang eased some fears related to Supermicro's server business. Juang was discussing Nvidia's partner companies, and he mentioned Supermicro among other server rack suppliers. That Supermicro remains in partnership with Nvidia is a great sign that its underlying business continues as it works to resolve its problems. Investors cheered that fact today.

Super Micro Computer Just Announced Big News and the Stock Is Soaring. Is the Worst Finally Over? | The Motley Fool

The artificial intelligence (AI) server maker took two important steps on the road to recovery, but the journey isn't over. The mad dash to adopt artificial intelligence (AI) has catapulted a number of companies into the spotlight, and Super Micro Computer (SMCI 30.39%), commonly called Supermicro, has arguably been one of the biggest beneficiaries. The company is the leading provider of servers specially designed to withstand the rigors of AI, giving Supermicro a pivotal role in the AI revolution. However, the spotlight can be a cruel mistress, which Supermicro recently experienced firsthand. The company became a victim of its own success, causing a number of self-inflicted injuries that sent the stock plunging as much as 84% from its all-time high, reached earlier this year. Supermicro announced that it had developed a plan to avoid delisting and had hired a new auditor. The news sent the stock soaring, up more than 30% Tuesday morning (as of this writing). Let's take a look at the events leading up to today, the company's big announcement, and what it means for investors. Supermicro was flying high earlier this year, riding the wave of AI adoption that caused a surge in demand for its AI-centric servers, sending the stock up more than 1,000% since the AI revolution kicked off in early 2023. But the celebration was short-lived, and the stock came crashing down. For those who haven't been following along, here's a quick recap of the issues that have plagued the beleaguered company: Given the extent and magnitude of Supermicro's troubles, it isn't surprising so many investors headed for the exits. It's always darkest before the dawn, or so the saying goes. This morning, things got a little brighter for Supermicro and its shareholders. The company announced that it had hired BDO as Supermicro's new accounting firm to complete its audit. This is the all-important first step to restoring legitimacy to Supermicro, though it will take some time for the audit to be completed, as the new firm will be starting from scratch. Perhaps as important, Supermicro announced that it had submitted a Compliance Plan with the Nasdaq "to support its request for an extension of time to regain compliance with the Nasdaq continued listing requirements." These two announcements gave investors hope that the worst had passed, and many piled back into the stock. While these developments are certainly positive, investors shouldn't get ahead of themselves, as a number of red flags remain. As a Certified Public Accountant (CPA) myself who has worked on a number of audits, I'm still concerned that Supermicro's previous auditor quit mid-audit. Situations like these usually occur when the auditor has significant concerns about the company's financial practices, when there's a higher-than-normal risk of impropriety due to lax internal controls, or when it can't come to agreement with the company's management about its accounting practices. Furthermore, since the company's original auditor resigned so soon after the short report -- which alleged accounting irregularities -- it increases the likelihood that where there's smoke, there's fire. Don't get me wrong: I'm rooting for Supermicro to clean up its act so it can focus on the AI market that represents such a compelling opportunity. I'm a shareholder and among those who believe the company has a bright future, so long as it gets its accounting ducks in a row. However, until I get more clarity on the issues that caused Supermicro's precipitous fall from grace, I won't be buying the stock. And I don't recommend it for your portfolio, either.

Why Super Micro Computer Stock Is Soaring Today | The Motley Fool

Supermicro stock is gaining ground on the heels of Nvidia's recently published third-quarter results. Supermicro is one of Nvidia's largest customers, and the artificial intelligence (AI) leader's Q3 results, commentary, and forward guidance are sending bullish signals for other AI stocks. Nvidia published its Q3 results after the market closed yesterday and reported sales and earnings for the period that beat Wall Street's expectations. The company reported non-GAAP (adjusted) earnings per share of $0.81 on revenue of $35.08 billion, beating the average analyst estimate's call for per-share earnings of $0.75 on revenue of $33.16 billion. The company also said that it was expecting revenue of roughly $37.5 billion in the fourth quarter, surpassing the average analyst estimate's call for sales of $37.08 billion in the period. On the heels of 94% year-over-year sales growth in Q3, the company's guidance for Q4 suggests annual sales growth of roughly 70%. Nvidia's strong performance and outlook suggest a favorable demand backdrop for Supermicro. And while some reports have suggested that the GPU leader has been diverting orders from Supermicro in favor of other customers, Nvidia CEO Jensen Huang name-checked the server specialist as one of his company's "great partners" during its conference call. Nvidia's Q3 report and commentary suggest that spending on AI infrastructure continues to be quite strong and will remain so in the near term. The company's GPUs are the core components of Supermicro's high-performance AI servers, and its sales performance and forward guidance provide trustworthy bellwethers for the kind of demand backdrop the server specialist is seeing. On the other hand, there are still questions surrounding Supermicro that make the outlook for its stock unclear. The company was recently able to avoid having its stock delisted from the Nasdaq stock exchange by submitting a filing plan to regain compliance with the Securities and Exchange Commission (SEC). Ernst & Young resigned as Supermicro's financial auditor in October due to concerns about the reliability of information from the company's management and audit committee. BDO has now come on board as the tech specialist's auditor. With BDO now hired, the company should be able to progress with the filing of its annual 10-K report for its last fiscal year. But there's still a risk that the stock could be delisted from the Nasdaq -- or that previously reported financial results could see significant downward revisions.

Super Micro stock soars over 30% as the hiring of a new auditor kept the company on the Nasdaq

Shares of Super Micro Computer (SMCI+26.04%) surged over 30% on Tuesday morning after the AI hardware company successfully maintained its Nasdaq listing by hiring a new auditor. The move comes several weeks after the server company's auditor, Ernst & Young, resigned, following months of disagreement over Super Micro Computer's governance practices and board independence. "We are pleased to welcome BDO as Supermicro's independent auditor," Super Micro CEO Charles Liang said in a statement. Moreover, the company submitted a detailed compliance plan to the Nasdaq, outlining its efforts to meet the exchange's requirements and avoid delisting. The San Jose-based company expressed its ability to meet key regulatory deadlines, stating that it expects to finalize its Annual Report on Form 10-K for the fiscal year ended June 30, 2024, as well as its Quarterly Report on Form 10-Q for the period ending September 30, 2024. The company aims to bring its periodic filings up to date within the discretionary period allowed by Nasdaq staff. The statement has alleviated fears about the tech giant's potential removal from the Nasdaq, putting an end to the uncertainty surrounding its listing. The news sparked a relief rally among investors, boosting confidence in the company's ability to navigate regulatory hurdles. Super Micro's stock is currently trading at $27, representing a steep decline of 78% from its March peak of $123. Super Micro makes hardware that supports AI applications. The stock has thrived for much of this year and entered the Fortune 500 at No. 498 as part of a frenzy over AI and related tools. As a key partner and reseller of Nvidia's (NVDA+1.76%) GPUs and other components, Super Micro integrates the technology into its servers to support AI workloads. Super Micro CEO Charles Liang and Nvidia CEO Jensen Huang are both Taiwanese immigrants and have a long-standing relationship. Super Micro Computer went through a rough phase in September when a short seller, Hindenburg Research, published a scathing report accusing the company of accounting red flags and questionable business dealings, including alleged sanctions evasion from exports to Russian and Chinese firms.

Super Micro Computer (SMCI) Appoints A new Auditor, Formally Submits A Compliance Plan To Stave Off A Potential Nasdaq Delisting, And "Delivers Direct-Liquid-Optimized NVIDIA Blackwell Solutions"

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. Super Micro Computer (SMCI), one of the leading suppliers of high-performance servers and liquid-cooled AI racks, has finally submitted a plan to regain compliance with the disclosure requirements stipulated by the Nasdaq exchange, paving the way for the embattled company to avoid a catastrophic delisting. To wit, in a new filing, Super Micro Computer has revealed that its board has appointed BDO USA as the new auditor. Moreover, the company has also submitted a compliance plan to the Nasdaq stock exchange "to support its request for an extension of time to regain compliance with the Nasdaq continued listing requirements." The company went on to note: "In the Compliance Plan, the Company indicated that it believes it will be able to file its Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 and become current with its periodic filings within the discretionary period available to the Nasdaq staff to grant." Bear in mind that Nasdaq has to formally accept this compliance plan for Super Micro Computer to avoid being booted off the tech-heavy exchange. For the benefit of those who might not be aware, Super Micro Computer's capacity for deploying liquid-cooled AI racks is currently 18 months to 2 years ahead of its competitors such as Dell, HP, and Cisco. In fact, SMCI was, until recently, NVIDIA's third-largest customer. However, given the company's recent troubles, which include allegations of financial impropriety, a preliminary DOJ investigation, the exodus of its second auditor in around 18 months, and a potential de-listing from the Nasdaq exchange, SMCI recently halted the expansion of its major factory in Malaysia, one that would have doubled its production capacity to 10,000 server cabinets per month. In other news, Super Micro Computer just announced the "highest-performing SuperCluster, an end-to-end AI data center solution featuring the NVIDIA Blackwell platform for the era of trillion-parameter-scale generative AI." As we've repeated ad nauseam, Super Micro Computer's latest string of bad luck began in August when Hindenburg Research published a damning report, detailing a litany of malpractices at the firm that ranged from distribution channel stuffing and partial shipments to re-hiring top executives responsible for accounting violations that had already resulted in a $17.5 million settlement with the SEC. Hindenburg Research also alleged that a material proportion of SMCI's sales came from non-arm's-length suppliers such as Ablecom and Compuware. In response to this explosive report, Super Micro Computer delayed the filing of its annual report for FY 2024, presumably in a bid to undertake a comprehensive internal review. Do note that under the prevailing statutory requirements, SMCI's annual report had to be filed by the 30th of August. The Nasdaq exchange then warned Super Micro Computer of a potential de-listing action should it fail to file the requisite annual report by the 16th of November. On the 13th of November, SMCI filed a Form NT 10-Q, explaining that it could not feasibly file its much-delayed annual report by the given deadline as it needed additional time to "select and engage" a successor audit firm following the sudden departure of Ernst & Young (EY) towards the end of October, complete an internal controls assessment, and provide for the successor audit firm to conduct a thorough review of the financial statements pertaining to the FY 2024 and Q1 2025.

Super Micro Computer Surges In Monday Pre-Market Amid Delisting Concerns: What's Happening? - NVIDIA (NASDAQ:NVDA), Super Micro Computer (NASDAQ:SMCI)

Shares of Super Micro Computer Inc. SMCI experienced a significant rise of 13.94% during pre-market trading on Monday, as per Benzinga Pro. This surge comes as the company faces potential delisting from the Nasdaq Stock Market. What Happened: Super Micro is preparing to submit a proposal to Nasdaq to avoid delisting. The company, which has seen considerable success due to the AI boom, is under scrutiny regarding its operations. The proposal is expected to be submitted by Monday, aiming to maintain its trading status on the exchange, Barron's reported on Monday. The delisting threat arises from concerns over the company's operations, despite its recent achievements in the artificial intelligence sector. By taking proactive steps, Super Micro hopes to avert the delisting risk and continue benefiting from the AI industry's growth. See Also: Michael Van De Poppe Says Bitcoin, Ethereum And Altcoins Close To The Point Where Investors Can 'Buy The Dip' Why It Matters: The potential delisting of Super Micro is linked to serious issues, including the resignation of its auditor, Ernst & Young, amid allegations of accounting irregularities and possible export control violations. Delisting could trigger an early repayment of up to $1.725 billion in bonds, posing a significant financial challenge for the company. Furthermore, Super Micro is approaching a critical Nasdaq deadline, with its future potentially hinging on the upcoming earnings report from Nvidia Corp. NVDA. The server manufacturer, once a key player in Nvidia's AI-driven success, now faces uncertainty as it navigates these challenges. The outcome of Nvidia's earnings could provide insight into whether Super Micro can stabilize its situation or face further difficulties. Read Next: Dogecoin 'Repeating Its Historical Pattern,' Says Analyst: Meme Coin Set To Touch $3 By Trump's Inauguration Day 2025 Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image via Shutterstock Market News and Data brought to you by Benzinga APIs

SMCI 'just too important a player' in AI space to be delisted, says analyst By Investing.com

Investing.com -- Super Micro Computer Inc (NASDAQ:SMCI) shares rocketed more than 23% in premarket trading Tuesday after the AI server maker surprisingly introduced an independent audit firm at the last minute and submitted a compliance plan to NASDAQ. The move could potentially avert the company's delisting, though NASDAQ still needs to formally approve the plan and grant an extension for the filing of its 10-K. Still, an analyst at Lynx Equity Strategies views this approval as likely to be "just a formality." In an earlier note, Lynx analyst KC Rajkumar stressed that SMCI is "just too important a player in the AI data center space for it to be allowed to delist and go fallow." "While we claimed no knowledge of the timing of regulatory filing, we opined that delisting, leading to loss of access to capital, was a low probability event," he added. He also noted the stock was trading at a significant discount and set a price target (PT) of $45. Following the filing of an 8-K form last night, which significantly reduces the risk of delisting, Rajkumar believes a "vicious short-squeeze" could occur in SMCI shares. The stock initially surged 30% in after-hours trading, and the analyst now expects it to "make a run for our PT in the near term." He also warned that hardware peers like Dell (NYSE:DELL), which had seen investor interest on the expectation of capturing SMCI's market share, may face a decline in their stock prices. Reiterating its view, Lynx emphasized SMCI's leadership in the scalable AI data center market for liquid-cooled server racks. "SMCI has a leadership position in the rapidly expanding liquid-cooled GPU server data center market, a position it is unlikely to give up any time soon," Rajkumar continued. During SMCI's recent delisting uncertainty, some investors speculated that Nvidia (NASDAQ:NVDA) might redirect GPU server orders away from SMCI to other players, with Dell being a potential beneficiary. However, Lynx analysts disagree, arguing that scalable liquid cooling technology is not a commoditized market and that infrastructure vendors like SMCI are not easily replaceable.