- The U.S. Department of Justice is investigating Super Micro Computer following accusations of accounting manipulation by Hindenburg Research, leading to a 12% drop in shares and delays in the company’s annual report.
- Super Micro’s market value surged amid the generative AI boom, driven by demand for infrastructure like ChatGPT, but cooling AI stock rallies suggest a more cautious investment outlook as financial returns may develop more slowly than anticipated.
OUR TAKE
The investigation by the U.S. Department of Justice is a significant development, especially given the serious allegations of accounting manipulation. The involvement of short-seller Hindenburg Research, known for its aggressive stance against companies it perceives as fraudulent, raises the stakes. If proven true, the allegations could undermine investor confidence, not just in Super Micro but potentially in other tech companies that have experienced rapid growth during the AI boom.
-Tacy Ding, BTW reporter
What happened
The U.S. Department of Justice is investigating Super Micro Computer (SMCI.O), nearly a month after short-seller Hindenburg Research accused the AI server maker of “accounting manipulation.”
Super Micro’s shares dropped by approximately 12% after the news emerged. Sources familiar with the situation stated that the investigation is in its early stages, with a U.S. attorney recently contacting individuals who may hold pertinent information.
The prosecutor has reportedly requested information related to a former employee who accused the company of accounting violations.
Late last month, Super Micro delayed the filing of its annual report, citing the need to review “internal controls over financial reporting,” following Hindenburg’s announcement of a short position and allegations of “accounting manipulation.”
Hindenburg’s claims stemmed from a three-month investigation involving interviews with former senior employees and legal records.
Hindenburg’s allegations also included evidence of undisclosed related-party transactions and failure to comply with export controls, among other issues.
Also read: Super Micro fights back against short-seller claims
Also read: Super Micro confirms it will delay annual financial filings
Why it’s important
A review of tender documents earlier this year indicated that Chinese entities acquired high-end Nvidia (NVDA.O) chips embedded in server products made by several companies, including Super Micro, through resellers.
The U.S. government has been tightening restrictions on the sale of such technology to China. Super Micro has greatly benefited from the surge in generative AI, as businesses invest in the infrastructure needed to support applications like ChatGPT, boosting its market value from around $4.4 billion to $67 billion by March.
Super Micro’s rise during the generative AI boom highlights the massive demand for infrastructure powering AI applications like ChatGPT, pushing its market value to unprecedented heights.
However, the cooling of AI stock rallies suggests a more measured long-term outlook. Investors are realising that while AI offers transformative potential, the financial returns on heavy investments in this sector may unfold more gradually than initially expected. This could lead to a more cautious investment climate in AI-driven technologies moving forward.
