Super Micro Stock Declines Following Unwarranted Monday Rally

Super Micro Computer’s stock experienced a decline, following a significant rally the previous day.

On Monday, the company announced the deployment of over 100,000 GPUs equipped with a liquid cooling solution for some of the largest artificial intelligence factories, which initially led to a 16% surge in share prices due to positive market sentiment regarding demand for its servers.

Despite this good news, investor apprehension about the company appears to have overshadowed the positive demand data. The recent rally coincides with a challenging period for Super Micro, which had previously reported disappointing gross profit margins for its fiscal fourth quarter, which concluded in June.

Investor concerns intensified following a report from the short-selling firm Hindenburg Research in late August. The report alleged “glaring accounting red flags,” undisclosed related-party transactions, sanctions and export control failures, and customer issues within the company. In the wake of the report, Super Micro announced that it would delay filing its 10-K report for the fiscal year that ended on June 30. Subsequently, the Nasdaq issued a notification indicating that Super Micro was not in compliance with a listing rule requiring timely filings with the Securities and Exchange Commission.

Although Super Micro has stated that Hindenburg’s report contained false statements and does not anticipate significant changes in its fourth-quarter or fiscal 2024 results, the stock has continued to decline, falling 62% from its record closing high of $118.81 on March 13. On Tuesday, shares were down 4.4%, trading at $45.63, making it the second-worst performer in the Nasdaq 100, while the Nasdaq Composite rose by 1.3%.

While the recent announcement regarding GPU deployment indicated strong demand, it appears that investors remain cautious in light of the ongoing uncertainty surrounding the company’s financial health and the implications of the Hindenburg report. As Super Micro approaches its upcoming earnings report, Wall Street anticipates an adjusted earnings per share of $0.74 on revenue of $6.45 billion, representing substantial year-over-year growth. However, concerns about the company’s negative operating and free cash flows over the past three quarters persist.

Barron’s and the Street contributed to this report.