Supermicro may be in hot water on the accounting front, but enterprise customers more likely to care about products

This comes along with the news last week that the company’s auditor, Ernst & Young, resigned, causing Supermicro’s stocks to plunge more than 30%. The accounting firm said it reported to Supermicro’s auditing committee in July “concerns about several matters relating to governance, transparency and completeness of communications.” EY only just signed on as Supermicro’s auditor earlier this year, but it claimed that it could “no longer” rely on management’s and its audit committee’s representations and was “unwilling to be associated with the financial statements prepared by management.”

Further, Supermicro was scrutinized in an August report by Hindenburg Research, which found “glaring accounting red flags,” as well as evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues. The report was the result of a three-month investigation involving interviews with former senior employees and industry experts, along with reviews of litigation records, international corporate and customs records.

In the face of all this, the Nasdaq has given Supermicro until November 16 to file its 2024 annual report and remain in compliance, lest it be delisted. The company has been here before: It was temporarily removed from the Nasdaq in 2018, also for failing to file financial statements.

On an analyst conference call this week, Supermicro CEO Charles Liang said the company was “working with urgency to become current again with our financial reporting.”

‘Spy chips’ most likely worse than accounting problems

Supermicro counts among its customers nearly all the big players in big tech, including semiconductor darling Nvidia, Intel, AMD, IBM, and Microsoft. In June, the company also made headlines — giving its shares a jolt — when Elon Musk said it and Dell were both supporting his xAI supercomputer project.

Some have reported that Nvidia is diverting orders to other providers, purportedly to distance itself from Supermicro and diversify the supply chain. However, the two are likely unrelated, Stolarski asserted. Supermicro has done well with Nvidia — it has a high-end platform and several large customers ready to deploy. But now other vendors are catching up, so it makes sense that more Nvidia GPUs will go to other server vendors.