Could This Move by Nvidia Protect It From Super Micro Computer’s Woes?


Super Micro Computer (NASDAQ: SMCI) and Nvidia (NASDAQ: NVDA) have both been winners during this artificial intelligence (AI) boom. Nvidia makes graphics processing units (GPUs) and other related products and services, while Super Micro Computer, also known as Supermicro, incorporates GPUs — those of Nvidia and other chip designers — into its server systems for data centers. This has resulted in triple-digit sales growth for both companies in the latest quarters; ongoing high demand is a positive sign for the future.

But in recent times, Supermicro has stumbled. A short report in August alleged troubles at the company, and at the same time but in an unrelated move, Supermicro delayed its 10-K annual report. A few weeks later, The Wall Street Journal reported that the Justice Department was investigating the company. Supermicro’s problems intensified last month when the firm’s auditor, Ernst & Young, quit, citing concerns about the company’s financial reporting.

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Now, it’s natural for investors to worry about the impact of these troubles on Nvidia due to the companies’ relationship. But could one particular move by Nvidia protect it from Supermicro’s woes? Let’s find out.

Image source: Getty Images.

First, a bit more detail about Supermicro’s recent situation, and then I’ll talk about how the company works with Nvidia. A short report in late August set off the string of difficulties at Supermicro, with Hindenburg Research alleging several issues, including “glaring accounting red flags.” Supermicro responded, calling the statements “false or inaccurate.”

Meanwhile, Supermicro delayed the filing of its 10-K annual report but informed customers and investors that it didn’t expect any significant changes to fourth-quarter or annual-earnings figures. But the pressure still is on for Supermicro to complete the 10-K: Nasdaq sent the company a non-compliance letter due to the delay, and the company has until later this month to file or submit a plan to regain compliance with listing rules. So, at this point, the company faces the possibility of delisting.

As for The Wall Street Journal report about a possible Justice Department probe, Supermicro declined to comment.

Finally, late last month, Ernst & Young resigned as auditor of Supermicro. Ernst & Young stated that it was no longer “able to rely on management’s and the Audit Committee’s representations,” and it was “unwilling to be associated with the financial statements prepared by management.”



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