AI Server Maker Struggles to Meet Expectations
A Rocky Year for Super Micro Computer
Super Micro Computer, a leading artificial intelligence server maker, started 2024 on a high note, but the year ultimately proved to be a disappointment. Despite being on track to notch a yearly gain of 6% in December, the company’s shares remained far below their highs near $120 in mid-March.
Riding the AI Wave
Super Micro’s success is closely tied to the booming demand for computing hardware from tech companies building out their artificial intelligence infrastructure. The company’s specialized servers, powered by Nvidia’s chips, are used in data centers to support AI software. This led to a remarkable 87% surge in 2022 and a staggering 246% jump in 2023, culminating in an all-time high of $118 in early 2024.
Volatility Sets In
However, the company’s stock began to show signs of instability soon after, as it struggled to meet analysts’ and investors’ high expectations. The situation worsened in the latter half of 2024, following a report by short-selling firm Hindenburg Research, which accused Super Micro of accounting violations, export control violations, and questionable relationships between executives and suppliers.
CEO Defends Company
Super Micro CEO Charles Liang responded to the allegations, stating that the Hindenburg report contained “false or inaccurate statements” and “misleading presentations of information.” Despite this, the company faces the risk of being delisted from the Nasdaq and an investigation into its accounting practices by the Department of Justice.
Turbulent Ride
Super Micro’s stock has experienced significant gains and losses as it navigates the fallout from the Hindenburg report. The company delayed filing its annual report, leading to a 20% drop in shares. Downgrades from Barclays and JPMorgan, as well as the resignation of its accountant, Ernst & Young, further pressured the stock.
Recovery Efforts
However, the company has taken steps to address its challenges, hiring a new auditor and submitting a compliance plan to the Nasdaq. This led to a near-80% weekly gain in mid-November. An independent review of its business found no evidence of fraud or misconduct, boosting shares nearly 30% on December 2.
Looking Ahead
Despite its troubles, analysts remain bullish on Super Micro, anticipating earnings to rise nearly 120% year over year to $0.75 per share and revenue to surge 180% to $5.9 billion. The company’s major deal to supply servers to Elon Musk’s artificial intelligence startup xAI is a significant reason for optimism. As the AI revolution continues to grow, Super Micro is poised to benefit from its position as a leading server maker.
Leave a Reply