Super Micro Computer (SMCI) Faces Major Crisis, Stock Plunges Due to Financial Scandal

Super Micro Computer, a leading company in artificial intelligence (AI) server technology, is facing a major crisis of confidence as a series of serious allegations have cast a dark shadow over its business. The company’s stock, once a “shining star” in the AI sector, is now in a downward spiral, leaving investors anxious and distrustful.

Timeline of Events Leading to Super Micro Computer’s Collapse

Here’s how the story unfolded:

• August 27: Hindenburg Research releases a shocking report, accusing Supermicro of accounting manipulation, self-dealing, sanctions evasion, and channel stuffing. Immediately after the report, Supermicro’s stock dropped significantly, reflecting investor concerns about these serious allegations.
• August 28: Supermicro announces that it cannot file its 10-K report on time, as it needs more time to assess the effectiveness of its internal controls over financial reporting. The company emphasized that it does not expect any changes to its fiscal 2024 results, which were reported on August 6.
• September 3: Supermicro sends a letter to customers and partners, reiterating that it does not expect significant changes in its fiscal 2024 results, while rejecting the allegations by Hindenburg Research as “false and inaccurate.” The company also stressed that recent events do not impact the quality of its products.
• September 20: Supermicro receives a notification from Nasdaq, stating that it is not in compliance due to the delayed 10-K filing. The company has 60 days to restore compliance or submit a recovery plan.
• September 26: The Wall Street Journal reports that the U.S. Department of Justice is investigating Super Micro Computer, reportedly based on allegations from a former employee about accounting violations.
• October 30: The auditing firm Ernst & Young (EY) announces it has resigned as Supermicro’s auditor. EY had warned the company as early as July that the timely filing of its 10-K report was at risk, stating that it could not rely on management’s statements and was unwilling to be associated with the company’s financial statements.
• November 5: Supermicro announces preliminary fiscal 2025 first-quarter earnings, which were incomplete and below market expectations. The company’s stock continues to fall sharply.

Current Situation of Super Micro Computer

In its preliminary report on the first-quarter results, Supermicro stated that revenue is expected to be between $5.9 billion and $6.0 billion, below the previous guidance of $6.0 billion to $7.0 billion. Adjusted earnings per share (EPS) are expected to be between $0.75 and $0.76, in the middle of the previous forecast range of $0.67 to $0.83.

For the second quarter, the company anticipates further revenue declines, projecting $5.5 billion to $6.1 billion in revenue, with EPS from $0.56 to $0.65.

Management also emphasized that its Independent Special Committee confirmed that the Audit Committee acted “independently,” contrary to EY’s concerns that it may have been influenced by the CEO. In a press release, the Special Committee stated:

“There is no evidence of fraud or misconduct on the part of management or the Board of Directors. The Committee is recommending a series of remedial measures to strengthen the company’s internal governance and oversight functions and expects to deliver a full report within the week or next.”

Despite this update, Supermicro still has not provided a specific timeline for submitting its 10-K, though it has committed to complying with Nasdaq regulations.

Uncertainty and the Future of Supermicro

Supermicro now faces pressure from multiple directions. The inability to file its financial report on time has increased concerns over the company’s transparency and reliability. Supermicro’s stock continues to plunge as investors grow more skeptical about the company’s growth prospects, especially as the allegations from Hindenburg Research and the Justice Department’s investigation remain unresolved.

On the market, Supermicro’s competitors are also moving forward, as AI and cloud technology continue to expand rapidly. Losing the trust of one of the world’s top auditing firms like EY has dealt a serious blow to Supermicro’s reputation. Furthermore, Nasdaq’s warning could be the first step in delisting the company’s stock if the issue is not resolved soon.

During these difficult times, it is essential for Supermicro to implement internal improvements and rebuild investor confidence. The company will need to restructure, strengthen its governance, and increase transparency to maintain its position in a volatile market.