Super Micro Computer stock tumbles after DOJ probe report

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 US Department of Justice.

The Journal, citing anonymous sources, said the DOJ is investigating the company for possible accounting violations. The issue was first brought to light by short-selling firm Hindenburg Research in August in a report that accused Super Micro Computer of “glaring accounting red flags” as well as “undisclosed related party transactions” and “penalties and export control failures’. “

Super Micro declined to comment on the matter.

Super Micro makes AI server gear that uses Nvidia GPUs, and Wall Street analysts believe it is a major hardware supplier for Meta. His business boomed in early 2024 as the tech industry created a lot of AI software with increasing power requirements – and thus demand for products like Supermicro. It’s one of the AI-driven stocks that has surged to record highs, and even with its decline on Thursday, the stock is still up 57% year-to-date.

Its earnings earned the company a spot in the S&P 500 at the start of the year. But the stock has fallen from highs of more than $1,200 in mid-March before joining the index. Shares fell in early August when the company missed Wall Street’s high expectations in its fiscal fourth-quarter earnings report, and later in the month when the company delayed filing its annual 10-K report with the SEC.

Regarding both the scathing Hindenburg report and Super Micro’s late filing, CEO Charles Liang wrote in a letter to customers on Sept. 3: “Neither of these events affects our products or our capacity and ability to provide the innovative IT solutions you rely on. every day, our production capabilities are unaffected and continue to run at pace to meet customer demand.”

The company in August reported fourth-quarter earnings of $6.25 per share, short of analysts’ expectations of $8.25. Its revenue of $5.3 billion was just short of Wall Street’s estimate of about $5.32 billion, but doubled from a year earlier.

Liang said in his letter: “We do not anticipate any material change in financial results in the fourth quarter or fiscal year 2024.” However, JPMorgan analyst Samik Chatterjee recently downgraded the stock to Neutral from Overweight, nearly halving his price target from $950 to $500. Shares fell as low as $373 on Thursday before rebounding to around $400 in the afternoon.

Nearly 37 percent of Wall Street analysts still recommend buying the stock as of Thursday afternoon, according to Bloomberg consensus estimates. Analysts see the stock rising to $685 in the next 12 months.

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Laura Bratton is a reporter for Yahoo Finance.

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