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Super Micro Shares Drop 22% After Financial Report Raises Investor Doubts

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Super Micro shares fell sharply by 22% on Wednesday, hitting their lowest level since May of last year after releasing an underwhelming financial update. The company, a prominent server manufacturer, has been struggling with internal and regulatory challenges, causing its stock price to drop to $21.55—down by 82% from its peak in March, effectively erasing approximately $57 billion from its market capitalization.

The decline in share value follows the resignation of Super Micro’s auditor, Ernst & Young, making it the second auditing firm to part ways with the company within two years. Super Micro has not submitted audited financial statements since May and faces the threat of being delisted from Nasdaq if it does not file its annual results with the SEC by mid-November. Despite issuing preliminary quarterly financial results, the company failed to offer a timeline for when it might file its annual financials.

During a recent call with analysts, CEO Charles Liang confirmed the search for a new auditor but declined to discuss Ernst & Young’s resignation or governance issues. Liang did, however, emphasize Super Micro’s commitment to resolving its overdue financial reporting. Analysts at Mizuho suspended their coverage of Super Micro due to the lack of comprehensive financial data, while Wedbush analysts noted that the latest update from Super Micro left “more questions than answers.”

For the quarter ending on September 30, Super Micro reported net sales between $5.9 billion and $6 billion, missing analysts’ expectations of $6.45 billion but marking a year-over-year increase of 181%. The company’s business has experienced significant growth due to demand for servers equipped with Nvidia’s processors designed for artificial intelligence applications. Nevertheless, analysts expressed concern about the December quarter’s forecast, which fell below estimates with anticipated revenue between $5.5 billion and $6.1 billion—lower than the projected $6.86 billion—and earnings per share of 56 to 65 cents, below the expected 83 cents.

Amid these financial challenges, Super Micro’s stock had previously soared due to high demand for its AI-driven servers, specifically those utilizing Nvidia’s latest GPU, Blackwell. CEO Liang indicated that Super Micro is ready to deliver Blackwell-based servers, but Nvidia’s limited chip supply has impacted shipments. CFO David Weigand reassured investors that Super Micro maintains a robust relationship with Nvidia, which has confirmed no changes in its GPU allocations to the company.

Additionally, Super Micro’s board has appointed a special committee to investigate Ernst & Young’s concerns regarding the company’s financial practices. Following a three-month review, the committee reported no evidence of fraud or misconduct but recommended several improvements in internal governance. Super Micro affirmed its commitment to implementing these recommendations and taking all necessary actions to maintain its Nasdaq listing.

 

Dell and Palantir to Join S&P 500; Shares Surge

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Dell and Palantir both saw their shares jump about 7% in after-hours trading on Friday following the announcement from S&P Global that they will be added to the S&P 500 index. Palantir will replace American Airlines, while Dell will take the place of Etsy in the benchmark index.

This move marks Dell’s return to the S&P 500, having been a member from 1996 to 2013 before going private and rejoining the public market in 2018. For Palantir, which went public in 2020 after over 15 years as a venture-backed startup, this inclusion highlights its recent profitability and growing revenue. The company reported a net income of $135.6 million for the second quarter, a significant increase from the previous year.

The inclusion of these companies reflects their high market capitalizations—Palantir’s exceeds $67 billion, while Dell’s is over $72 billion—matching the median market cap of S&P 500 companies at approximately $33.5 billion. The addition often leads to a rally in stock prices as index-tracking funds adjust their portfolios to include the new members.

Dell’s stock had already surged 90% in 2023, driven by strong demand for AI servers. Meanwhile, Palantir, known for its data analytics and work with government and military agencies, has seen accelerated revenue growth and posted its first profits in late 2022.

The S&P 500 additions are intended to better represent U.S. stocks with high market caps. The inclusion of these companies follows recent changes, such as the addition of cybersecurity firm CrowdStrike in June. Shares of software maker Workday fell 2% in after-hours trading, despite earlier speculation about its potential inclusion in the index.