Shares of artificial intelligence server maker Super Micro Computer (SMCI) fell 15% on Thursday after The Wall Street Journal reported that the company is being investigated by the US Department of Justice.
The Journal, citing unnamed sources, said the Justice Department is investigating the company for possible accounting violations. The issue was first brought to light by short-selling firm Hindenburg Research in August in a report that accused Super Micro Computer of “blatant accounting red flags” as well as “undisclosed related party transactions.” and “sanctions and failures in export control.” “
Super Micro declined to comment on the matter.
Super Micro makes AI server equipment that uses Nvidia GPUs, and Wall Street analysts believe it is a major hardware supplier to Meta. Its business boomed in early 2024 as the tech industry created a plethora of AI software with ever-increasing power demands and therefore demand for products like Supermicro’s. It’s one of the AI-powered stocks that has risen to record levels and even with its drop on Thursday, the stock is still up 57% from last year.
Its earnings earned the company a spot on the S&P 500 earlier in the year. But the stock has fallen from highs above $1,200 in mid-March before joining the index. Shares fell in early August when the company missed Wall Street’s high expectations in its fiscal fourth-quarter earnings report, and later in the month again when the company delayed filing its annual 10-K report to the SEC.
Referring to both the scathing Hindenburg report and the delay in Super Micro’s introduction, CEO Charles Liang wrote in a letter to customers on September 3: “Neither of these events affects our products or our ability to offer the solutions of innovative IT they trust.” every day. “Our production capabilities are unaffected and continue to operate at pace to meet customer demand.”
In August, the company reported fourth-quarter earnings per share of $6.25, less than the $8.25 analysts had expected. Its revenue of $5.3 billion was just below Wall Street estimates of about $5.32 billion, but was more than double the previous year.
Liang said in his letter: “[W]”We do not anticipate any material change to our fourth quarter or fiscal 2024 financial results.” Still, JPMorgan analyst Samik Chatterjee recently downgraded the stock to Neutral from Overweight, nearly halving his price target. from $950 to $500. Shares fell as low as $373 on Thursday before recovering in the afternoon to around $400.
Nearly 37% of Wall Street analysts still recommend buying the stock as of Thursday afternoon, according to the Bloomberg consensus estimate. Analysts predict the stock will rise to $685 in the next 12 months.
Laura Bratton is a Yahoo Finance reporter.
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