In March, Super Micro Computer joined the S&P 500 after an impressive 2,000% stock increase over two years, outpacing even Nvidia. However, less than two weeks after the index change, Super Micro’s stock peaked at $118.81 with a market cap close to $70 billion. Since then, the stock has plummeted by 72%, dropping the valuation below $20 billion and signaling the first major public market sign that AI-driven hype may have been overstated.

Super Micro, a key provider of Nvidia-powered servers for AI, saw its shares tumble by 33% on Wednesday after auditor Ernst & Young resigned, citing concerns over the company’s financial statements. The stock fell an additional 16% on Thursday, raising the possibility of Nasdaq delisting unless compliance is restored by November 16.

Analysts at Mizuho noted the “higher delisting risk” without an auditor, adding uncertainty about finding a replacement. Ernst & Young, appointed in March 2023 to replace Deloitte, cited irreconcilable differences with Super Micro’s financial disclosures.

A spokesperson for Super Micro expressed disagreement with Ernst & Young’s decision and confirmed efforts to appoint new auditors. Representatives for Ernst & Young and Deloitte declined to comment.

A Historical Shift: Super Micro vs. Nvidia

Founded over three decades ago, Super Micro operated relatively quietly in Silicon Valley until AI investment surged in late 2022, with Nvidia at the forefront. Alongside Dell, Super Micro benefitted significantly from the AI boom, building specialized servers for Nvidia GPUs. Its revenue doubled in recent quarters, although official SEC filings have not been submitted since May.

The market sentiment has since shifted sharply. Following the S&P index change announcement in March, Super Micro's stock suffered several declines, including a 19% drop in August when the company announced delays in filing its annual SEC report. The delay was attributed to an extended review of internal controls over financial reporting for the period ending June 30, 2024.

Short-selling firm Hindenburg Research then announced a short position in Super Micro, citing evidence of “accounting manipulation.” Later, the Wall Street Journal reported that the Department of Justice was in the early stages of a probe into the company.

The Countdown Begins

In September, Super Micro received notification from Nasdaq that delayed filings put it out of compliance with listing rules, allowing 60 days to file the report or present a compliance plan. The deadline for compliance is mid-November.