Shares of Super Micro Computer (SMCI) have been on a notable rebound, with the stock on track to post a 78% weekly gain as of Friday. This uptick is driven by the AI server maker’s strong connection to Nvidia, especially with its key deal involving Elon Musk’s xAI. On Friday, SMCI shares surged over 11% to approximately $33, despite lingering far below their peak of over $120 in March when the company joined the S&P 500.
The rally commenced at the start of the week, fueled by anticipation around Super Micro’s submission of a compliance plan to Nasdaq, aiming to sidestep delisting threats. The stock’s momentum amplified once the company confirmed it had sent the plan and brought on a new auditor, BDO, following the resignation of their former accountant, Ernst & Young, in late October.
Super Micro has recently been navigating the fallout from an August report by Hindenburg Research, a well-known short seller. The report accused the company of financial misconduct, export control violations, and dubious connections between executives and company partners. In response to the findings, Super Micro delayed crucial SEC filings, such as its annual 10-K and the latest quarterly 10-Q. These delays heightened the risk of Nasdaq delisting, and it’s reported that the Department of Justice is also investigating the company.
Amidst the turmoil, shares have dramatically plunged over recent months. Especially impactful was Ernst & Young’s departure, which led to a more than 30% drop in Super Micro’s stock on a single day in late October. The audit firm’s resignation expressed bluntly that they were “unwilling to be associated” with the financial documents produced by Super Micro’s management.
The situation worsened when Super Micro’s fiscal first quarter earnings reported on November 5 failed to meet Wall Street’s expectations. Wedbush analyst Matthew Bryson pointed out that the company attributed their weaker sales to delays in Nvidia’s Blackwell AI chips and the hiccups with SEC filings. Bryson holds a Neutral rating on SMCI and recently adjusted his price target from $32 down to $24.
In response to the uncertainty, some firms, including Barclays, Wells Fargo, and KeyBanc, have paused their coverage of the stock. However, Super Micro indicated it is on schedule to submit overdue filings to the SEC, hoping to catch up on its periodic reports within Nasdaq’s discretionary period.
In a note following Monday’s news, Wedbush’s Bryson remarked that appointing a new auditor marks a significant stride in Super Micro’s efforts to maintain its Nasdaq listing and offers a route to file its financials appropriately. Nonetheless, Bryson noted lingering concerns sparked by Ernst & Young’s exit, aggravated by ongoing DOJ scrutiny, questionable executive partnerships, and regulatory challenges faced by BDO, the newly appointed auditor.
Positive news from Nvidia has also provided a tailwind for Super Micro’s current share price rally. The chip giant’s recent impressive earnings report and reassurances about Blackwell chip production progress certainly helped. During Nvidia’s earnings call, CEO Jensen Huang acknowledged Super Micro as a crucial partner, which likely boosted investor confidence.
As of Friday’s trading, Super Micro’s turnaround means short sellers of SMCI have faced $1.4 billion in mark-to-market losses since the stock bottomed at $18.01 on November 14, according to S3 Partners’ data. Ihor Dusaniwsky, Managing Director at S3 Partners, told Yahoo Finance that the stock’s recent movements suggest it’s becoming a “squeezable” stock, with both short sellers and long buyers pushing the price upward.
Laura Bratton, a journalist for Yahoo Finance, has been covering developments in this unfolding story. You can follow her updates on X @LauraBratton5. For the latest in stock market news and insightful analysis, feel free to explore further on Yahoo Finance.
