The U.S. Department of Justice is currently investigating Super Micro Computer, as reported by the Wall Street Journal. This comes shortly after allegations from the short-seller group Hindenburg Research, which accused the AI server manufacturer of potential accounting irregularities. Following these claims, Super Micro’s stock plummeted by nearly 17%.
According to the WSJ, which cited anonymous sources, the investigation is still in its nascent stages. A prosecutor from a U.S. attorney’s office has recently reached out to collect information from individuals who may have pertinent insights related to the case. One focus of this inquiry seems to revolve around a former employee’s allegations of accounting misconduct within the company.
Last month, Super Micro postponed the filing of its annual report, indicating a need to assess its internal controls regarding financial reporting. This announcement followed Hindenburg’s disclosure of its short position alongside its claims of accounting manipulation. The short-seller’s report was grounded in a thorough three-month investigation, which included interviews with former senior executives and an examination of litigation documents.
Among Hindenburg’s allegations were claims of undisclosed related-party transactions and lapses in adherence to export regulations. While the company has publicly refuted these claims, the ramifications of the situation remain significant.
On Thursday, Super Micro declined to comment on the ongoing DOJ investigation, and a request for clarification from the DOJ went unanswered.
In previous months, documents reviewed by Reuters indicated that Chinese entities acquired advanced Nvidia chips incorporated into products manufactured by multiple companies, including Super Micro, via third-party resellers. This situation falls under the broader trend of U.S. governmental scrutiny over the sale of sophisticated technology to China.
Notably, Super Micro has gained substantial traction from the generative AI revolution, with its market valuation soaring to $67 billion in March from a mere $4.4 billion. This impressive growth was driven by businesses investing in the technology essential for powering applications like ChatGPT. However, excitement around AI stocks has waned recently, as investors have begun to realize that the returns on these heavy investments may take longer to materialize than previously anticipated.
The saga surrounding Super Micro underscores critical economic issues at the intersection of finance and technology. As developments unfold, they raise questions about corporate governance, regulatory oversight, and the ongoing global competition in advanced technology sectors.