Super Micro Computer (SMCI) began 2024 with an impressive surge, more than doubling its value before peaking in March due to missed expectations and accounting allegations. However, a special committee found no wrongdoing, and the company has cleared its name.
Looking back at SMCI’s stock entry in 2024, several signs pointed to success: it makes key components for computing servers and assembles full technology racks. The business benefited from increased artificial intelligence (AI) spending, boosting Nvidia’s (NVDA) stock higher. At the time of entering 2024, SMCI’s valuation was reasonable at 12 times forward earnings.
In the first half of 2024, SMCI met expectations, driving up its value. However, as gross margins narrowed and valuations became frothy, the stock began to fall. A short-seller’s report claiming accounting fraud allegations led to a sharp decline. The auditor resigned due to trust issues with management.
A special committee later cleared Super Micro of wrongdoing, but recommended replacing the CFO. Following this, the stock regained positive territory. Currently, SMCI trades at 12.9 times forward earnings, mirroring its entry in 2024 valuation.
The company still benefits from AI computing server demand and efficient liquid-cooled technology. This provides significant energy savings (up to 40%) and space savings (80%). Wall Street forecasts solid growth for fiscal year 2025, with revenue expected to rise nearly 70%. Nevertheless, the stigma from past accounting allegations may deter investors.
Many institutions tend to avoid companies with such issues, even if they are cleared of wrongdoing. Given more attractive options available, it’s unlikely SMCI will match 2024’s performance in 2025.
Source: https://www.fool.com/investing/2024/12/20/super-micro-computer-rose-more-than-300-to-start-2