AI server maker Super Micro Computer (SMCI) stock tumbled 15% Thursday after The Wall Street Journal reported that the company is being probed by the US Department of Justice.
The Journal, citing unnamed sources, said the DOJ is investigating the company for potential accounting violations. The issue was first dropped at light by the short-selling firm Hindenburg Research in August in a report that accused Super Micro Computer of “glaring accounting red flags,” along with “undisclosed related party transactions” and “sanctions and export control failures.”
Super Micro declined to comment on the matter.
Super Micro makes AI server equipment that uses Nvidia’s GPUs, and Wall Street analysts consider it’s a big supplier of hardware to Meta. Its business flourished initially of 2024 since the tech industry has created a slew of AI software with increasing power demands — and hence, demand for products like Supermicro’s. It’s one among the many AI-driven stocks that has surged to record levels, and even with its decline Thursday, shares are still up 57% from last yr.
Its gains earned the company a spot throughout the S&P 500 initially of the yr. Nonetheless the stock has fallen from highs above $1,200 in mid-March before joining the index. Shares dropped in early August when the company missed Wall Street’s high expectations in its fiscal fourth quarter earnings report, and later throughout the month again when the company delayed filing its annual 10-K report back to the SEC.
In reference to every the scathing Hindenburg report and Super Micro’s delayed filing, CEO Charles Liang wrote in a letter to customers on Sept. 3, “Neither of those events affects our products or our ability and capability to deliver the progressive IT solutions that you simply simply rely on daily. Our production capabilities are unaffected and proceed operating at pace to satisfy customer demand.”
The company in August reported earnings per share of $6.25 for the fourth quarter, lower than the $8.25 analysts had expected. Its revenue of $5.3 billion came in just below Wall Street’s estimate of about $5.32 billion, but greater than doubled from the prior yr.
Liang said in his letter, “[W]e don’t anticipate any material changes in our fourth quarter or fiscal yr 2024 financial results.” Still, JPMorgan analyst Samik Chatterjee recently downgraded the stock to Neutral from Obese, nearly halving his price goal from $950 to $500. Shares fell as little as $373 Thursday before recovering throughout the afternoon to around $400.
Nearly 37% of Wall Street analysts still recommend buying the stock as of Thursday afternoon, based on Bloomberg consensus estimate. Analysts see shares rising to $685 over the next 12 months.
Laura Bratton is a reporter for Yahoo Finance.
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