This article is compiled by Semiconductor Industry Review (ID: ICVIEWS) from bnext

Even Jen-Hsun Huang couldn't save the 'AI speculative stock'.

Super Micro's share price plummeted by over 28% in early trading on October 30. Earlier, the company disclosed that Ernst & Young, the accounting firm responsible for its accounting affairs, had resigned due to months of disagreements with the company regarding governance and board independence. The company is currently seeking cooperation with a new independent certified public accounting firm.

After the pre-market news on October 30, the company's share price plummeted by 35% at one point and continued to decline after the market opened, reaching a low of $32.3. The closing price was eventually $33.07.

In its resignation letter, Ernst & Young stated that it "did not want to be associated with financial statements prepared by management." The accounting firm also expressed concerns about the board's independence from CEO Charles Liang and "other management members."

It is understood that Ernst & Young was first hired to audit Super Micro's 2024 fiscal year, but Super Micro has not yet released its financial statements for this year and is currently under investigation by US authorities.

The auditor first pointed out issues with Super Micro's internal financial controls, governance, and transparency in late July, prompting the company to appoint a special board committee to investigate internal controls.

According to the resignation letter from Ernst & Young, "We are resigning due to recent information that prevents us from relying on the representations of management and the audit committee and our unwillingness to be associated with financial statements prepared by management. After consideration, we believe we cannot continue to provide audit services in accordance with applicable laws or professional obligations."

Regarding the resignation letter from Ernst & Young, Super Micro expressed regret and disagreement, stating that the investigation had not yet reached a conclusion. However, the company will take Ernst & Young's concerns seriously and carefully consider the investigation results and subsequent rectification suggestions.

Trouble with accounting practices, fined $17.5 million by the SEC

Super Micro has previously run into trouble with regulators over its accounting practices. In 2020, the company paid a $17.5 million fine to the US Securities and Exchange Commission (SEC) after regulators accused it of prematurely and incorrectly recording revenue.

At the end of August, the well-known global short-selling firm Hindenburg accused Super Micro of issues such as "accounting manipulation." Although Super Micro denied the allegations in Hindenburg's short-selling report, claiming that it contained "false or inaccurate" content about the company, the US Department of Justice initiated an investigation into Super Micro approximately one month later. As a result, Super Micro's share price was severely impacted, falling by over 40% since August 23.

In September 2024, the US Department of Justice initiated an investigation into Super Micro, which is in its early stages and includes an investigation into a former employee accused of violating accounting rules.

As of October 30, representatives of Super Micro and Ernst & Young did not immediately respond to requests for comment.

One of the top-performing stocks in the AI era

Super Micro develops and supplies end-to-end green computing solutions for enterprise IT, data centers, cloud computing, high-performance computing, and embedded systems worldwide. The company's products include a range of complete rack-mounted servers, workstations, blade servers, storage, graphics processors, systems, networking equipment, and complete rack solutions.

Super Micro was once considered a top-performing stock. As one of the world's top three server manufacturers, its products are highly useful in the infrastructure construction of the artificial intelligence industry.

Super Micro's share price increased by 246.24% in 2023 and by 188.2% in the first half of 2024. At its peak in March, its share price had increased by over 300% since the beginning of the year.

With the rise of the artificial intelligence industry in 2022, Super Micro, as a long-term partner of NVIDIA, seized this industrial opportunity and achieved significant growth. Its fiscal year 2023 (July 1, 2022, to June 30, 2023) revenue was $7.123 billion, an increase of 37.09% over the previous fiscal year. This strong performance fueled a sharp increase in its share price, which continued into the first half of 2024.

Super Micro is known as NVIDIA's "favorite son" because of the close relationship between the founders of the two companies, Jen-Hsun Huang and Charles Liang. Super Micro has priority access to NVIDIA's GPUs, and its products are often sold out as soon as they are produced. In the second fiscal quarter of 2024, Super Micro's revenue doubled year-on-year to $3.66 billion, half of which was attributed to AI.

Liang and Huang have a deep connection, having both started their businesses in 1993, with their companies located just 10 miles apart. Super Micro's motherboards have long featured NVIDIA's GPUs, and the company has always followed NVIDIA's lead. Later, when NVIDIA ventured into AI GPUs, which were not initially favored by many, Liang provided strong support by helping to produce servers that could combine NVIDIA GPUs for AI training. Huang has appeared at many Super Micro events and has acted as a "salesman" for Super Micro's server solutions.

Super Micro's latest financial report showed that it achieved revenue of $5.308 billion in the second quarter, an increase of 142.95% year-on-year, roughly in line with market expectations of $5.3 billion; non-GAAP diluted earnings per share increased by 78.06% year-on-year to $6.25, lower than market expectations of $8.07.

For the fiscal year ended June 30, 2024, Super Micro's annual revenue was $14.943 billion, an increase of 109.77% year-on-year, and non-GAAP diluted earnings per share increased by 87.04% year-on-year to $22.09.

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