The mad dash to adopt artificial intelligence (AI) has catapulted a number of companies into the spotlight, and Super Micro Computer (NASDAQ: SMCI), 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.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
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:
-
Hindenburg issued a short report that alleged, among other things, that Supermicro’s financials contained accounting irregularities, the company had failed to disclose related-party transactions, and had violated U.S. export bans.
-
The very next day, Supermicro added fuel to the fire by announcing it would be late filing its annual 10-K report with the Securities and Exchange Commission (SEC), saying it needed additional time to review its internal controls — or the processes it uses to ensure compliance with accounting rules and regulations.
-
Just weeks later, reports emerged that the U.S. Department of Justice (DOJ) was conducting a probe of the company, according to The Wall Street Journal. The investigation appeared to be the result of a whistleblower report that alleged accounting violations.
-
Supermicro revealed that it had received a letter of non-compliance from the Nasdaq exchange, which could ultimately lead to delisting.
-
Supermicro disclosed that its auditor, Ernst & Young — one of the world’s most respected accounting firms — had resigned in the midst of the company’s audit. The auditors cited issues related to internal controls over Supermicro’s financial reporting.
-
In another regulatory filing, Supermicro admitted it wouldn’t be able to file its most recent quarterly report on time, which again raised the specter of delisting.
