Super Micro Computer (SMCI), a major supplier of servers and AI racks, is facing serious financial and legal challenges. Mizuho analysts now suggest that these troubles could impact NVIDIA, as SMCI is a significant customer.
SMCI is dealing with allegations of financial misconduct, a DOJ investigation, auditor resignations, and a potential delisting from Nasdaq. Mizuho argues that SMCI's negative working capital model, requiring external funding to purchase GPUs for large NVIDIA systems, puts the company at risk of a funding deficit.
"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." - Mizuho Analyst
SMCI's Growing Challenges
SMCI's problems began with allegations from Hindenburg Research, including claims of channel stuffing, partial shipments, rehiring executives involved in past accounting violations, and questionable payments to suppliers.
These allegations led to a delay in filing SMCI's annual report, a Nasdaq delisting warning, a DOJ investigation, and the resignation of its auditor, Ernst & Young (EY). This is SMCI's second auditor resignation in 18 months.
Despite these issues, SMCI maintains its innocence and claims its annual report will not require material changes. However, SMCI's stock has dropped 37% in the last five trading days.
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
