SMCI Stock: Once-In-A-Lifetime Opportunity, or Is Super Micro Computer Doomed?

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If you’re just looking at raw percentage gains since the AI mania began, Super Micro Computer (NASDAQ:SMCI) would probably qualify for the top spot of which stock popped the most–before it crashed.

This stock has been riddled with a boatload of problems and is down 77% from its March peak–39% in the past month alone. SMCI stock now trades at just 13 times trailing earnings. This low earnings multiple suggests either of the following: the market is punishing Super Micro Computer more than it should or the books are cooked more than we can imagine.

To draw conclusions here, let’s take a deeper look into the drama behind the stock and what could happen going forward. I’m going to assume you know nothing about this business, so let’s understand what it is.

READ ALSO: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Super Micro Computer describes itself in its recent 10-Q report as “…a Silicon Valley-based provider of accelerated compute platforms that are comprised of application-optimized high performance and high-efficiency server and storage systems for a variety of markets, including enterprise data centers, cloud computing, artificial intelligence (“AI”), 5G and edge computing. Our Total IT Solutions include complete servers, storage systems, modular blade servers, blades, workstations, full rack scale solutions, networking devices, server sub-systems, server management and security software. We also provide global support and services to help our customers install, upgrade and maintain their computing infrastructure.”

In simple terms, sell servers for cloud computing and AI models. This makes them–or at least you’d think as such–a very good bet on AI. That’s exactly why this stock rallied so much and analysts were so optimistic about where it was heading. The breadth of this company’s products across so many high-growth areas made it the perfect AI bet in some sense:

So, why didn’t this bet pay off in recent months?

The product suite here really made it a natural beneficiary of the AI boom. AI computing power was–and still is–surging. It only made sense that companies that are providing the hardware for these power-hungry large language models were about to post triple-digit growth figures and nosebleed valuations.

The stock rose ~4,630% from the end of 2019 to its peak.

However, cracks began to appear in August when short-seller Hindenburg Research published a report alleging accounting irregularities at Super Micro. The company then delayed filing its annual 10-K report. You don’t really do this unless something is really wrong–and something was wrong.

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