Super Micro Computer says it would be selling a lot more servers -- if only it had Nvidia's latest chips. Unfortunately, investors can no longer afford to take the company at its word.
The specialized server maker that began the year as one of the hottest names in artificial intelligence has now become too cold to touch. In an unaudited "business update" Tuesday afternoon, Super Micro reported preliminary revenue between $5.9 billion to $6 billion for its fiscal first quarter ended September, which was below the company's prior forecast range of $6 billion to $7 billion. The numbers are preliminary because Super Micro has no auditor after Ernst & Young bailed last week in one of the more colorful exits in memory. The Big Four accounting firm said it was "unwilling to be associated with the financial statements prepared by management" in its resignation letter, according to a filing by Super Micro.
That filing alone took nearly 33% off Super Micro's stock price, which was already down 59% from its peak in March. The latest update came out on election night, which didn't stop investors from voting with their feet again. Super Micro's stock slid more than 21% in early trading Wednesday, putting the share price below its level from a year ago -- before AI hype more than quadrupled its value.
Such a plunge suggests Super Micro may be a cheap AI play again. But while its current multiple of less than seven times forward earnings is indeed now at a discount to main rivals such as Dell and Hewlett Packard Enterprise, Super Micro is no bargain. The company has been under a cloud since famed short-selling firm Hindenburg Research issued a report in late August claiming "glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export-control failures, and customer issues."
Super Micro declined to comment on the report at the time, but the next day announced it was delaying its annual 10-K filing, saying it needed time to "complete its assessment of the design and operating effectiveness of its internal controls over financial reporting." That 10-K still hasn't been filed, and the recent loss of its auditor suggests it likely isn't coming soon. Super Micro said Tuesday it is working "diligently" on the matter, but the company that was just added to the S&P 500 in March now stands in danger of being delisted from the Nasdaq.
And what of Super Micro's actual business? Demand for AI components remains hot. The biggest tech companies made clear last week that they are still spending a boatload -- and planning to spend boatloads more -- on that very technology.
But while even $5.9 billion in revenue for the September quarter is more than double what Super Micro managed in the same period last year, it would also be the first time the company has missed the low end of its guidance range in at least five years, according to FactSet data.
The company also projected a revenue range of $5.5 billion to $6.1 billion for the current quarter, the midpoint of which is more than a billion shy of what Wall Street was expecting. In a conference call Tuesday, Super Micro Chief Executive Charles Liang blamed most of the shortfall on customers waiting on availability of Nvidia's new Blackwell chip. But he conceded that the 10-K delay that has threatened the company's Nasdaq listing "may impact a little bit."
Wall Street is rightly skeptical. Vijay Rakesh of Mizuho suspended his rating on the company on Wednesday, citing "lack of clarity on financials" in his report. Samik Chatterjee of JP Morgan cut the shares to underperform, citing "more uncertainty around both the regulatory filings as well as business fundamentals."
In a note ahead of Tuesday's update, Mehdi Hosseini of Susquehanna said there is "minimal trust in the company's reported financials and guidance." Following the update, he also took his price target on the stock to $15 a share -- 46% below its last close -- calling it a "trough valuation" in line with the last time it was delisted from the Nasdaq in 2018. That Super Micro has been down this road before probably shouldn't be comforting.
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