Super Micro Computer: Charting a Path Through Recovery

With its shares more than doubling year to date, Super Micro Computer (NASDAQ: SMCI) is rebounding from challenges linked to uncertainty in its accounting practices. Is this recovery a fluke or the beginning of a new growth phase? Let’s explore what 2025 could mean for this artificial intelligence (AI) hardware company.

About Super Micro Computer

Founded in 1993, Super Micro Computer has established itself as a key player in Silicon Valley, specializing in server and data center hardware. For years, its shares remained stagnant, barely moving between 2015 and 2021, until the launch of ChatGPT in 2022 ignited an impressive surge, which peaked at $119 in early 2024.

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Known as Supermicro, the company plays a vital intermediary role. It transforms graphics processing units (GPUs) produced by chipmakers such as Nvidia and Advanced Micro Devices into functional computer servers. Supermicro is particularly noted for its energy-efficient designs that help clients save money while using AI algorithms.

This intermediary position allows Supermicro to gain from its partners’ innovations in chip design while also enjoying significant operational growth.

Investors Grow Uneasy Over Accounting Issues

Despite its success, Supermicro’s upward momentum faced hurdles by mid-2024. An August report from short-seller Hindenburg Research raised alarms, accusing the company of accounting manipulation and serious ethical breaches.

In response, Supermicro postponed its annual report for fiscal year 2024, and its auditor, Ernst & Young, resigned, expressing a desire to dissociate from its financial practices.

This troubled past raises valid concerns. In 2020, the Securities and Exchange Commission fined Supermicro $17.5 million over accounting violations, and in 2018, shares were delisted from the Nasdaq for similar reasons.

Investors feared this recent delay could result in another delisting, potentially impacting stock liquidity and driving away cautious institutional buyers.

However, optimism is returning. Management asserts that it expects to file the delayed reports by February 25, maintaining that its prior filings will not require restatement.

This update is encouraging for Supermicro, as it indicates that fears of an accounting scandal may be exaggerated, thereby refocusing attention on its robust operational performance.

Image source: Getty Images.

Supermicro Reports Strong Business Growth

According to preliminary figures, Supermicro expects fiscal second-quarter sales to have increased by 54% year over year, reaching between $5.6 billion and $5.7 billion as clients invest in its data center liquid cooling systems and AI servers. While impressive, this growth rate could accelerate further as Supermicro’s partner, Nvidia, launches its new Blackwell GPUs.

Recently, Supermicro confirmed it has fully entered production for servers utilizing Blackwell chips, a major step forward as data center clients pursue competitiveness in the advancing generative AI landscape.

Though facing accounting and legal uncertainties, Supermicro’s valuation appears to account for potential risks. Trading with a forward price-to-earnings ratio of 23, its shares are less expensive than the Nasdaq average of 28, even with a strong growth profile.

While I remain optimistic about Supermicro, potential investors may want to wait until some uncertainties are resolved before making a move.

Is Super Micro Computer a Good Investment Right Now?

Before investing in Super Micro Computer, keep these insights in mind:

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*Stock Advisor returns as of February 21, 2025

Will Ebiefung holds positions in Super Micro Computer. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

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