Supermicro's Stock Struggles Amidst AI Boom and Tariff Concerns

Supermicro faces significant stock declines yet shows potential growth as AI continues to thrive. Investors are advised to weigh the company's recent gains against possible challenges ahead.

Date: 09-04-2025

AI Rating: 6

Recent Stock Performance
Super Micro Computer (SMCI) has been under considerable pressure recently, experiencing a decline of over 70% from its peak of $118.82 in March 2024. This fall can largely be attributed to a Hindenburg Research report alleging serious financial mismanagement and unethical practices, including accounting irregularities.

Supermicro's challenges were compounded when their auditor, Ernst & Young, resigned, and the company delayed its annual report, raising concerns about its compliance with Nasdaq listing rules. This led to fears of potential delisting, which would further diminish investor appeal.

However, recent developments paint a more positive picture. Following the appointment of BDO USA as the new auditor and the submission of compliance plans, Supermicro seems to be stabilizing. An internal review found no evidence of managerial misconduct, and the company has resumed its delayed filings, alleviating some investor concerns.

Business Growth Outlook
Despite the tumultuous background, Supermicro's operational fundamentals remain strong. The company has forecasted second-quarter sales between $5.6 billion and $5.7 billion, reflecting a robust 54% year-over-year growth. The demand for their servers, especially those configured with GPUs from partners like Nvidia and AMD, positions Supermicro favorably as more companies adopt AI technologies.

Moreover, the rollout of Nvidia's new AI chips is likely to enhance Supermicro's sales and could lead to higher profitability through increased customer demand for more advanced servers. However, Supermicro's gross margin of around 12% pales compared to Nvidia's 75%, indicating limited pricing power within a fiercely competitive market.

Impact of Tariffs
New tariffs announced by the government pose additional risks to Supermicro’s supply chain, but a silver lining exists as these tariffs may impact foreign competitors more severely. Plus, the company is expanding its domestic manufacturing capabilities, which could mitigate some of these external pressures. Overall, while Supermicro's stock presents significant risk due to the past allegations and current challenges, the underlying business performance suggests potential for recovery and growth in coming months.

Stocks: SMCI NVDA AMD