Super Micro Computer (SMCI 7.65%) is a key player in one of the hottest technology fields -- artificial intelligence (AI) -- and revenue has jumped in the triple digits quarter after quarter. The company produces equipment such as workstations and servers for AI data centers and is an expert in the new growth area of liquid cooling technology. From this angle, the future looks bright.
But recent headwinds have weighed on Supermicro, pushing the stock down about 40% over the past two and half months. First, a Hindenburg Research short report alleging troubles at the company shook investor confidence. Then, Supermicro's inability to file its financial reports on time -- and the resignation of its auditor -- added to its difficulties. Without current, audited financial reports, Supermicro faces delisting from the Nasdaq -- and the lack of current reporting also may discourage investors from buying the stock.
Most recently, though, Supermicro delivered some bright news to investors. The company hired a new auditor to immediately get to work on the financial reports and Supermicro submitted a plan to regain listing compliance to the Nasdaq. The stock remains listed as the Nasdaq reviews the plan. Considering all of this, is the worst over for Supermicro? Here are two crucial things to watch.
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1. The financial reporting timeline
Supermicro said on Nov. 18 that it hired BDO U.S.A. as its independent financial auditor, and the firm would immediately set to work on bringing the company into compliance. The equipment maker fell behind on two financial reports: the 10-K annual report for the fiscal year ended June 30 and the 10-Q report for the quarter ended Sept. 30.
The company, in the compliance plan to the Nasdaq, said it believes it will be able to file both reports and become current on financial reporting "within the discretionary period available to the Nasdaq staff to grant."
It will be important to keep an eye on Supermicro's progress here. If the company is able to meet this goal, it will remain listed on the Nasdaq -- and investors also will have a clear view of the company's financial situation. If the earnings reports are unchanged or little changed from previous unaudited versions, investors may consider returning to Supermicro shares.
But as of now, risk remains. If the company misses a Nasdaq deadline or if the Nasdaq rejects Supermicro's compliance plan, the company still could be cut from the index. And if the audited earnings reports, once released, disappoint investors, the stock might continue to suffer.
2. Nvidia's Blackwell launch
What does the launch of Nvidia's Blackwell architecture have to do with Supermicro? Well, Supermicro greatly depends on the latest innovations of this top AI chipmaker because Supermicro includes them in its equipment. So, for instance, if you're a customer looking for a Blackwell-powered server, you could order that through Supermicro. This means high demand for Nvidia's Blackwell could equal high demand for Supermicro's equipment.
Nvidia has already started shipping Blackwell sample graphics processing units (GPUs) and initial equipment to select customers. And the company aims to ramp production throughout this current quarter. Supermicro is one of Nvidia's key partners, as mentioned, selling equipment that includes Blackwell GPUs.
But, considering Supermicro's recent troubles, Nvidia itself could favor re-routing its orders placed with Supermicro to other equipment makers, or customers could opt to buy from other equipment makers. For example, Elon Musk's AI start-up xAI shifted its server orders from Supermicro to Dell, UDN.com reported.
It's too early to say whether many such shifts will happen, but it's a possibility. So, investors should be on the lookout for any signs of this -- and watch for revenue growth figures in Supermicro's next earnings report.
The Blackwell launch could be enormous for Supermicro, but the company's current situation may weigh on the opportunity.
NASDAQ: SMCI
Key Data Points
What does this mean for Supermicro and for you?
Supermicro has taken quick action to address its problems, and that's positive. But we can't yet say the worst is over. We only can breathe a sigh of relief once Supermicro meets its financial reporting goals and satisfies the Nasdaq -- and once we're comfortable with the numbers in those financial reports.
On top of this, it will be important to see whether strong revenue growth continues, and the Blackwell launch should play a key role here.
All of this means that Supermicro is taking steps in the right direction, but it's still best to watch this story from the sidelines for now.
