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Stocks: Thoughts on SMCI

There’s been a lot of recent market turbulence in AI and semiconductor stocks and ETFs recently. Among the most volatile has been Super Micro Inc. A maker of enterprise infrastructure hardware that saw huge growth more recently in the AI gold rush.

What makes Super Micro interesting is their early adoption of Nvidia’s processors and building motherboards and support before other vendors like Dell or HP. They’re ahead of the pack, but at what cost?

EY was servicing the audit of their books for the release of their 10k filing, EY walked out, resigned. This through the company into a death spiral that is playing out now as the company trades at 20.00/share. Market trust appears to have been violated?!

Super Micro did host a call 11/6, Election Day. This was interesting as it’s know they recently delivered a cluster in record time to Elon Musk, a big Trump supporter. The call saw a very confident CEO basically saying nothing of substance as there’s no 10k to support his comments. It’s was near worthless and didn’t really reassure investors as he specially avoided the 10k topic and the EY exit entirely.

The theory

Super Micro can’t scale to support the volume of business to stay on top. They took the orders but are overwhelmed. They have cash but with the current leadership they can’t think big enough to scale up and meet the needs of AI demand and their current business.

Delivery to Elon Musk at record pace was a donation that maybe reciprocated in contracts or avoidance of policy that may affect other foreign technology. This would be a stretch but with Trump in office and Elon in his ear, it’s possible.

Delisted?

Maybe. The company has until 11/16 to deliver a plan to deliver their form 10K.

At this price, the company has been seen buying back shares.

Conclusion

The company has been delivering hardware to enterprise for years. Dell wins on reliability and service, super micro is lower cost but tens to be reliable. Super micro’s play to get in first with support for Nvidia processors is only valuable as long as they lead and provide a reliable competitive product. Dell will come up fast, but that depends on Nvidia processor supply. After Super Micro’s market debacle, it’s either going to reduce their access or it was a nifty way to lower share price to let people in, buy back stock, or prepare for an acquisition. All of which would have EY walk.

This post is opinion only and should not be used as advice in any way.

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