Shares of AI server maker Super Micro Computer (SMCI) fell 15% on Thursday after the Wall Street Journal reported that the company is under investigation by the U.S. Department of Justice.
Citing unnamed sources, the newspaper reported that the Justice Department is investigating the company for possible accounting violations. The issue stems from a report in August from short-seller Hindenburg Research that accused Super Micro Computer of “obvious accounting red flags,” “undisclosed related party transactions,” and “failed sanctions and export controls.” It was first revealed in the book. ”
Supermicro declined to comment on the matter.
Super Micro makes AI server equipment that uses Nvidia’s GPUs, and Wall Street analysts believe it is a major supplier of hardware to Meta. The company’s business flourished in early 2024 as the technology industry developed a large amount of AI software to meet the increasing demand for electricity, and hence the increasing demand for products like Supermicro. The company was among the AI-driven stocks that soared to record levels, and despite Thursday’s drop, the stock is still up 57% from last year.
Its profits led the company to join the S&P 500 at the beginning of the year. However, the stock price has fallen from a high of more than $1,200 in mid-March, before it joined the index. In early August, the company’s fourth-quarter earnings report disappointed Wall Street’s high expectations, causing its stock price to fall, and later that month, the company postponed filing its annual 10-K report with the SEC. The stock price fell again.
In connection with both the damning Hindenburg report and Supermicro’s filing delays, CEO Charles Liang wrote in a letter to customers on September 3 that “these events will “This does not affect our products or our ability or ability to provide innovative IT solutions that our customers rely on.” Our production capacity is unaffected and continues to operate at a pace to meet customer demand. ”
In August, the company reported fourth-quarter earnings per share of $6.25, below analysts’ expectations of $8.25. The company’s revenue of $5.3 billion was slightly below Wall Street’s estimate of about $5.32 billion, but more than doubled from a year earlier.
Charles Liang, CEO of Super Micro, gave the keynote speech at COMPUTEX 2023 held in Taiwan. (Walid Berrazeg/SOPA Images/LightRocket via Getty Images (SOPA Images via Getty Images)
“We do not expect any material changes to our financial results for the fourth quarter or fiscal year 2024,” Liang said in the letter. Still, JPMorgan analyst Samik Chatterjee recently downgraded the stock from overweight to neutral and nearly halved his price target from $950 to $500. The stock fell to $373 on Thursday, but recovered to about $400 by afternoon.
As of Thursday afternoon, nearly 37% of Wall Street analysts still recommended the stock as a buy, according to Bloomberg consensus estimates. Analysts expect the stock to rise to $685 over the next 12 months.
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Laura Bratton is a reporter for Yahoo Finance.
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