Growing Troubles at Super Micro Computer: What Investors Need to Know

Super Micro Computer (NASDAQ: SMCI) is facing mounting challenges that are leaving investors anxious about the company’s future.

Tough Times Ahead for Supermicro

The company’s troubles began in late August when Hindenburg Research published a critical short report. Almost immediately, Supermicro announced a delay in its 10-K filing. By September, the Department of Justice had opened an investigation into the company’s accounting practices, as reported by The Wall Street Journal. Last month, a significant warning came with the resignation of Ernst & Young as auditor, raising serious concerns.

Following these events, Supermicro released its preliminary fiscal 2025 first-quarter results but provided little insight regarding the status of its delayed 10-K filing. The company has also filed for an extension on its 10-Q report. As a result, the stock has plummeted by 65% since the initial short report from Hindenburg.

Upcoming Nasdaq Deadline

Supermicro received a notice from Nasdaq on September 17, stating that it had failed to comply with the exchange’s rules regarding timely SEC filings. The company has a 60-day window to either file its 10-K or devise a plan for compliance, which ends on November 16. If it fails to meet this deadline, it faces the risk of being delisted, causing its stock to trade over the counter (OTC) and losing its position in the S&P 500 and related ETFs.

Despite the urgency, the company’s next steps remain unclear, especially given its absence of an auditor. In its preliminary quarterly earnings on November 5, management promised to implement compliance measures but did not specify a timeline for when the 10-K will be filed. Furthermore, an update on November 5 from the Independent Special Committee clarified that their Audit Committee had acted free from any influence by CEO Charles Liang and found no evidence of fraud or misconduct within the management or board.

Concerns Over Nvidia Relationship

While Supermicro faces potential SEC or DOJ fines, the most pressing risk may be the deterioration of its relationship with Nvidia (NASDAQ: NVDA), a critical partner. Reports suggest Nvidia is redirecting orders away from Supermicro to other server manufacturers, likely due to concerns about reputational damage connected to Supermicro’s turmoil.

This shift may also be due to operational fears as Nvidia prepares to launch its latest Blackwell chips. Shareholders will be watching closely when Nvidia reports its fiscal third-quarter earnings on November 20, as the earnings call may provide further insight into Supermicro’s situation.

The Path Ahead for Super Micro Computer

Time is of the essence for Super Micro Computer as it grapples with significant hurdles. Investors may soon learn whether the company can navigate these challenges effectively.

Failure to present a compliance plan to Nasdaq and negative indications from Nvidia’s earnings could lead to further decline in the stock’s value. However, there remains a chance for recovery if the company can reassure investors, submit its findings from the independent committee, and mitigate any bad news in Nvidia’s report.

Nonetheless, rebuilding investor confidence will not be an easy task.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.