The Rise and Fall of Supermicro: A Cautionary Tale
Supermicro, a tech company specializing in AI-oriented servers, has been on a wild ride. Its share price surged in 2023, driven by the explosive growth in AI applications. The company’s modular servers and components, designed to fit various AI needs, made it a hot commodity for investors and AI-oriented businesses. As a result, Supermicro’s revenue jumped nearly 1,000%, and its net income increased by 1,030%.
A Peak in Performance
In June, Supermicro released its fiscal year 2024 report, showcasing a company at its peak. The report revealed revenue of $14.9 billion, more than double the previous year’s $7.12 billion. Net income for the year was an impressive $1.21 billion, almost double the 2023 total. CEO David Charles Liang proudly announced that his company was responsible for “70-80% of the world’s direct liquid cool servers (DLCs) in the last several months.”
Trouble Brewing
However, things took a turn for the worse in August. Hindenburg Group, a forensic accounting and research firm, released a report accusing Supermicro of numerous accounting irregularities. This led to a delay in filing the company’s 10-K report, which triggered a notice from NASDAQ giving Supermicro 60 days to comply or face delisting. To make matters worse, Ernst and Young, Supermicro’s auditors, stepped down in October due to concerns over the financial information provided.
The Fallout
The bad news continued to pile up, with Supermicro’s preliminary Q1 2025 earnings report falling short of expectations. As a result, the company’s shares plummeted from a peak of $120 in March to its current price of $22.11. Despite maintaining that there has been no financial impropriety, Supermicro has yet to file the required 10-K report. Even Nvidia, one of Supermicro’s largest clients, is rumored to be seeking alternatives.
A Risky Investment
Investors are now faced with a difficult decision: cut their losses or hold on for the full ride. While Supermicro’s products remain in high demand, the company’s struggles with regulatory requirements and accounting issues pose a significant risk. Even investors who see upside in buying the dip will likely proceed with caution.
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