One of the biggest AI stocks of the year has been hit by a downgrade from JPMorgan

It’s been a terrible few weeks for Super Micro Computer (SMCI) stock.

Shares in the data center server maker, seen as one of the biggest beneficiaries of this year’s AI frenzy, have fallen 25% since its late August annual report was delayed, shortly after short seller Hindenburg Research accused the AI ​​market of accounting manipulation.

The stock took another hit on Friday, falling more than 5% amid a global technology selloff. JPMorgan analysts downgraded Super Micro to Neutral from Overweight and nearly halved their price target to $500.

“As a result of our expectations for a near-term overshoot in the stock due to uncertainty, we prefer to recommend that new investors stay on the sidelines until the company returns to compliance,” JPMorgan’s Samik Chatterjee and his team wrote.

Analysts clarified that the downgrade was not driven by lower confidence in the company’s ability to regain compliance with regulators by issuing its annual financial filing, nor by the content of the Hindenburg report.

Apart from the filing, JPMorgan analysts expect “a response from Super Micro to ensure customers do not divert orders, which could involve aggressive pricing in our view and competitive response from peers.”

Analysts at Barclays and CFRA also downgraded the stock in recent days after the San Jose, California-based company said it needed more time to file its annual report for the fiscal year ending on June 30.

“Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting beginning June 30, 2024,” the company said in an Aug. 28 statement.

The announcement came a day after Hindenburg Research alleged, among other things, “accounting manipulation” in the high-end artificial intelligence flier.

The short seller claimed that despite a $17.5 million settlement in August 2020 with the SEC following an investigation into “widespread accounting violations,” Super Micro’s business practices had not improved, and senior executives who left amid the scandal were later rehired.

“Otherwise, we believe Super Micro is a serial repeat offender,” the report said.

Shares of Super Micro rose from under $300 in early January to a peak of nearly $1,200 by March, when the stock was added to the S&P 500 (^GSPC).

The ticker also joined the Nasdaq 100 Index (^NDX) in July.

On Friday, the stock was trading just below the $400 level. Despite the steep declines, Super Micro is still up about 35% year-to-date.

The story continues

The company recently announced a 10-for-1 stock split effective October 1.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow X at @ines_ferre.

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