Server Specialist Super Micro Computer under Fire: Hindenburg Revelations Cause Stock Price to Plummet

Shares of Super Micro Computer came under pressure on Tuesday after Hindenburg Research published a short position against the server manufacturer. The company has recently benefited significantly from the boom in artificial intelligence. The report by Hindenburg, led by Nate Anderson, sent shares down by as much as 8.7%, though they recovered to a loss of about 2% later in the trading session. The report from the renowned stock short-seller includes numerous allegations. Findings allegedly point to "obvious discrepancies in accounting, undisclosed transactions with related parties, violations of sanctions and export controls, as well as customer issues." Super Micro's convertible bonds also saw a decline following the publication. A spokesperson for Super Micro declined to comment on the speculations and rumors. Woo Jin Ho, an analyst at Bloomberg Intelligence, emphasized that Hindenburg's report might trigger increased scrutiny of the company's accounting practices and customer transactions. Although Hindenburg’s concerns are not new, this could draw attention to customer relationships—especially regarding the sale of AI systems to sanctioned companies and countries that are under heightened scrutiny by the U.S. Back in 2020, Super Micro managed to settle an investigation by the U.S. Securities and Exchange Commission regarding its financial reports and disclosures for the years 2014-2017. At that time, the company restated its financial reports and paid a fine while promising to avoid similar violations in the future. Super Micro sells high-performance servers for data centers and has seen significant demand in recent quarters due to the growth of AI. Despite a more than 55% decline from its peak in March, the company’s stock remains over 80% up for the year. Since 2019, the stock has gained at least 30% each year, soaring nearly 250% in 2023, which pushed the market capitalization above 30 billion dollars. The company has been listed in the S&P 500 Index since March and represents the largest single weight in the Russell 2000 Index since 1999. Super Micro's revenue doubled in the fiscal year that ended in June to 14.9 billion dollars. For the current fiscal year, management forecasts revenue of around 28 billion dollars. However, concerns exist regarding the profitability of AI-optimized servers, which, aside from Super Micro, are also sold by Dell Technologies and Hewlett Packard Enterprise. Due to their costly components, particularly Nvidia chips, these servers typically have lower margins. Hindenburg Research recently also targeted Axos Financial due to their involvement in problematic commercial real estate loans, and Icahn Enterprises, where a report led to a settlement between Carl Icahn and his company with the SEC. Earlier this month, Hindenburg also accused the chief of India's market regulatory authority of conflicts of interest that hindered a thorough investigation of manipulation and fraud allegations against the Adani Group.