Turmoil Surrounds Super Micro Computer: A Risk Worth Taking?
The rollercoaster ride continues for Super Micro Computer (NASDAQ: SMCI) investors, with the stock plummeting 9% year to date. The latest blow came when its auditor, Ernst and Young, resigned, citing concerns over the company’s financial statements and internal controls. This dramatic turn of events has left many wondering if Super Micro is a buy or a stock to avoid.
A History of Controversy
Super Micro’s accounting practices have been under scrutiny since August, when short-seller Hindenburg Research accused the company of manipulation and evading sanctions. The allegations led to a delay in filing its fiscal 2024 annual report, sparking further concerns about the company’s internal controls. The Department of Justice has also reportedly launched an investigation into Super Micro’s accounting practices.
Past Transgressions
This is not the first time Super Micro has faced accounting issues. In 2020, the SEC fined the company for prematurely recognizing revenue and understating expenses. CEO Charles Liang was fined $2.1 million, although no wrongdoing was proven.
A Glimmer of Hope
Despite the controversies, Super Micro remains a real company with a niche in the artificial intelligence (AI) infrastructure buildout. Its servers and rack solutions have gained popularity, particularly with the adoption of direct liquid cooling (DLC) technology. The company has deployed over 100,000 graphic processing units (GPUs) with DLC solutions, earning positive reviews.
The Verdict
While Super Micro’s AI opportunities and valuation may make it an attractive option for risk-tolerant investors, the company’s history of accounting manipulation and current turmoil make it a risky bet. Risk-averse investors should steer clear, but those willing to take a chance may find value in the stock’s current low price.
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