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Super Micro Computer (SMCI), a retailer of high-performance servers and liquid-cooled AI racks, is in a veritable maelstrom at the moment, battling allegations of financial malfeasance, a preliminary DOJ investigation, an audit-related nightmare where the firm has lost its second auditor in around 18 months, and an imminent de-listing from the Nasdaq exchange. Now, a Mizuho analyst is arguing that NVIDIA might not be able to emerge from this saga unscathed, especially as Super Micro Computer constitutes its third-largest customer.
Klein also warns that SMCI supplier NVIDIA is now at risk of missing guidance if SMCI cannot fund their business as they operate with negative working capital and require a lot of cash and funding to purchase large volumes of GPUs and liquid cooling…
— Kaushik (@BigBullCap) October 31, 2024
To wit, Mizuho believes that, as an enterprise with a negative working capital paradigm that necessitates extensive external funding to purchase large volumes of GPUs and liquid-cooled products "to build multi-million dollar NVL72 Blackwell rack systems," Super Micro Computer might not be able to tap the requisite external liquidity in the coming days, owing to a growing host of risk factors.
Should SMCI face a funding deficit, it will have a direct bearing on NVIDIA, which is "now at risk of missing guidance," as per Mizuho's assessment.
The analyst goes on to note:
"My view is any customer that does not want the risk of missing a deadline or financial target due to issues related to SMCI is going to move their AI server business to another supplier, like DELL."
Meanwhile, as noted above, Super Micro Computer's travails are only getting more entrenched. First, Hindenburg Research leveled hard-hitting allegations against Super Micro Computer back in August, asserting that the server provider engaged in distribution channel stuffing by pushing products to distributors based on artificially inflated demand forecasts, undertook partial shipments to meet specific sales targets and inflated its total shipment count in the process, re-hired top executives responsible for "widespread accounting violations" that had resulted in a $17.5 million settlement with the SEC, and paid nearly a billion dollars over the past three years to non-arm's-length suppliers such as Ablecom and Compuware.
BREAKING: Super Micro Computer was warned if it fails to provide an audited compliance plan by Nov 16, it will be delisted from the Nasdaq.
This news comes 1 day after auditor Ernst & Young resigned. $SMCI is $NVDA's 3rd largest customer & heavy user of $NVDA's vendor financing. https://t.co/SQKE9Oc3zB pic.twitter.com/cBSEFfFVQi
— Financelot (@FinanceLancelot) October 31, 2024
In the aftermath, Super Micro Computer delayed the filing of its annual report for the fiscal year that ended on the 30th of June, 2024, presumably in a bid to undertake a comprehensive internal review. Under the prevailing statutory requirements, that report had to be filed by the 30th of August. What's more, SMCI's continuing dilatory tactics have now attracted the wrath of the Nasdaq exchange, which has warned of a potential de-listing action should the firm fail to file the requisite annual report by the 16th of November.
What's more, the DOJ has also reportedly launched an investigation into the affairs at Super Micro Computer, with a particular focus on the alleged accounting violations.
Elsewhere, as we recently reported, Ernst & Young (EY) sent a letter to Super Micro Computer's audit committee earlier this week, tendering its resignation as the company's officially designated accounting firm:
“We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.”
Bear in mind that, with EY's resignation, Super Micro Computer has lost its second auditor in around 18 months.
$SMCI said it "disagreed" with the accounting firm's decision and does not expect the "resolution of any matters raised by EY" to result in the restatement of its quarterly reports for fiscal 2024 or prior fiscal years.
— NOTRELOAD AI (@thudderwicks) October 30, 2024
Interestingly, throughout this saga, SMCI has continued to profess innocence and has maintained that its annual report for the fiscal year 2024 will not undergo "any material changes."
Over the past five trading days, Super Micro Computer shares have recorded a whopping loss of 37 percent.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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