AI firm Super Micro soars 20% despite allegations of short sales, DOJ probe reported

Super Micro has had a rough couple of weeks due to an investigation into short sales and a reported DOJ investigation. However, shares of the AI ​​hardware maker rose more than 20% in the last day after the company announced that it will ship 100,000 GPUs per quarter. The share price has since fallen, but remains nearly 10% above where it started the week.

As hype around the AI ​​sector fuels demand for related stocks from manufacturers to utilities and draws billions of dollars of venture capital into private companies, Super Micro’s recent success — which came after a dismal stretch — reflects the continued appetite of investors regardless of risk.

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An irregular past

Founded in 1993, Super Micro focuses on producing servers and storage systems for a variety of industries, from data centers to 5G. Its stock exploded after the launch of OpenAI’s ChatGPT in November 2022, with Super Micro’s share price rising from around $8 in early 2023 to a peak of $114 in March 2024.

Even before the investigation into the short sales in August by prominent firm Hindenburg Research, Super Micro faced a number of controversies, including a 2018 Bloomberg report alleging that Chinese officials forced a backdoor into Super Micro’s servers. as well as a 2020 deal with Securities. and the Exchange Commission for violations of accounting practices.

However, Hindenburg’s accusations revived concerns about the company. In its report, the missing vendor claimed that Super Micro had “ridden the wave of AI enthusiasm” but was still guilty of “accounting manipulation”, including pushing vendors to deliver faulty products and rehiring executives involved in the earlier scandal. The company’s shares fell as much as 26% the day after the report.

The day after the report, Super Micro announced it would not file its annual financial statements on time because it needed to assess the “operational effectiveness of its internal controls.” In early September, Super Micro CEO Charles Liang sent a letter to customers and partners saying the report and delay would not affect the company’s products.

Despite assurances, Super Micro faced additional scrutiny when Wall Street Journal reported in late September that the Justice Department was investigating the company following Hindenburg’s allegations, with a US attorney in the DOJ’s San Francisco office contacting people with relevant information.

The story continues

While Super Micro’s stock continued to hover around $40 in early October, its announcement on Monday sent shares soaring. In a press release, the company introduced its proprietary GPUs, a critical component used by data centers to train and deploy AI models.

Even with the recent rally, Super Micro is still late filing its annual report and continues to face investor pushback, including two class-action lawsuits alleging the company misrepresented or failed to disclose information to its backers.

This story was originally featured on Fortune.com