Super Micro Stock Plunges After Auditor Resignation, AI Rivals Surge

Shares of Super Micro Computer dropped over 30% in midday trading on Wednesday following news of the resignation of its auditor, Ernst & Young, a move that raises serious concerns over the company’s governance and financial stability. Over the past three months, Super Micro shares have lost more than 60% of their value. The latest issues follow a short report from Hindenburg Research in late August, which had already shaken investor confidence.

Competitors Dell and HP See Gains Amid Super Micro’s Troubles

As Super Micro struggles, rivals Dell Technologies and Hewlett Packard Enterprise are seeing gains, with Dell’s stock jumping 8% and HP rising 3% by noon on Wednesday. Both companies are positioned to capture market share in the artificial intelligence (AI) server market, an area where Super Micro has been a strong player. Despite being a Super Micro partner, Nvidia experienced only a modest 1% dip in its stock price, indicating limited immediate impact.

Analysts Suspend Coverage and Warn of Governance Issues

Investment firm Needham suspended its Buy rating on Super Micro shares, expressing concerns over the company’s management and corporate governance. “Not only does Ernst and Young's resignation raise considerable questions about the validity of Supermicro's current and past financial statements, but it also raises significant questions about Supermicro's corporate governance and management's commitment to integrity and ethical values,” noted Needham analysts. The firm also sees a heightened risk of Super Micro defaulting on its Term Loan Agreement with Bank of America.

Further complicating matters, Wells Fargo analysts believe the resignation will likely prevent Super Micro from filing its fiscal 2024 statements on time "as it moves to hire a new public accounting firm,” analysts noted in a statement.

Possible Delisting from NASDAQ

Super Micro faces the additional risk of non-compliance with NASDAQ listing requirements. The company received a listing non-compliance notice from NASDAQ on September 17, giving it until November 16 to present a compliance plan or face potential delisting—its second such issue in five years. Mizuho analysts caution that EY’s departure only heightens the risk of not filing the necessary 10-K statement in time, which could lead to a delisting scenario.

Limited Business Update Planned for Next Week

Super Micro announced that it will release a business update for the first quarter of fiscal 2025 on Tuesday, November 5, at 5 p.m. ET. However, the update will not be a full financial report.

Looking Ahead: Uncertain Path for Super Micro

Super Micro’s future remains clouded as the company addresses its financial reporting and governance issues. With AI and data center demands on the rise, companies like Dell and HP are positioned to capture market share from Super Micro’s ongoing challenges. The path forward for Super Micro depends on securing a new auditor, meeting NASDAQ compliance, and restoring investor confidence. However, if delisted, Super Micro risks a more substantial impact on its market position and financial stability.