NVIDIA's Strategic Shift Sparks Turmoil in AI Server Market as Super Micro Stumbles
AInvestTuesday, Nov 5, 2024 1:00 am ET
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NVIDIA is reportedly shifting its previous orders from Super Micro Computer to alternative suppliers in an effort to stabilize the tumultuous AI server sector. This strategic reallocation follows a series of challenges faced by Super Micro, including financial reporting episodes that could potentially risk its market listing if unresolved by the November 20 deadline. The company previously experienced delisting in 2018 due to non-compliance with financial submission regulations.

The recent developments have caused significant ripples across the industry. Super Micro's shares plunged over 45% in the past week, marking its worst weekly performance as its auditor resigned amidst concerns over the reliability of its financial statements. This came after a short-selling report in late August raised red flags about the company’s financial health, triggering a delay in the submission of its annual 10-K report. While the company assured that no significant changes were expected for the fiscal year 2024, the market remains jittery.

NVIDIA’s decision to reroute these orders is anticipated to mitigate potential disruptions in the AI server space. Consequently, companies like Gigabyte and ASRock have seen increased demand and customer inquiries, capitalizing on the void from Super Micro's setbacks. Both companies have revised their revenue forecasts upward, with Gigabyte expediting the implementation of liquid cooling technologies to complement NVIDIA’s expansion initiatives. Meanwhile, ASRock has reportedly secured orders from Super Micro's former small to medium-sized clients, leading to a record third-quarter revenue.

Despite this, the fallout extends beyond just Super Micro and its immediate competitors. Partners like LEADTEK, which relies significantly on Super Micro for its AI market share, are also feeling the strain. Given the complex web of relationships where LEADTEK is backed by companies closely tied to Super Micro’s chairman, the ripple effects could potentially alter their standings in the AI landscape.

As the situation develops, stakeholders within the supply chain, including key service providers, are navigating an increasingly uncertain environment. Companies like Ablecom Technology and Compuware Technology might confront substantial interruptions in operations, underscoring the widespread implications of Super Micro's current predicament. Amidst this turbulence, businesses are exercising caution and formulating strategies to hedge against further industry instability.

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