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Super Micro Holds Steady at Third in WSB Rankings Amidst Market Turmoil and Auditor Exit

Stock SpotlightTuesday, Nov 5, 2024 6:04 am ET

1min read

In the latest WSB rankings, Super Micro Computer, Inc. (SMCI) holds the third position, unchanged from the previous day. This comes amidst ongoing struggles, as the stock has experienced a four-day losing streak, dropping by a staggering 47.01% over this period. The latest dip saw its intraday price hit the lowest point since November 2020, reflecting severe market pessimism regarding its future.

The recent exodus of the company's auditor along with ongoing financial troubles has caused concerns over potential delisting. This has become a focal point within the tech sector due to Super Micro’s strong partnership with NVIDIA. There are growing rumors that NVIDIA has started reallocating orders from Super Micro to alternative suppliers, such as Gigabyte and ASRock, which are reportedly adjusting their revenue and shipment forecasts upwards in response. These suppliers have managed to secure contracts with major clients, further cementing their standing in the market.

The developments have been unsettling for Super Micro, especially after a well-known short-seller questioned their financial reporting in late August, triggering doubts about their financial stability. Following the publication of the short report, Super Micro delayed its annual 10-K filing, assuring stakeholders of no major changes for fiscal 2024. However, the resignation of Ernst & Young as its auditor due to reliability concerns has intensified skepticism about its financial health.

As Super Micro's stock experienced a significant plunge last week, eroding over 45% in value, the company’s association with NVIDIA remains under scrutiny. The collaboration had previously been pivotal, contributing to Super Micro's rise as a key player within AI stocks. However, with the potential redistribution of NVIDIA’s orders, Super Micro's standing in the industry is precarious.

The ripple effects of Super Micro's predicament are evident across its network of associated companies, including Leadtek, AcBel Polytech Inc., and Chicony Power Technology. These entities, which have intricate ties to Super Micro, particularly through shared leadership and investments, are now subject to the uncertainties stemming from Super Micro's challenges.

As the sector keenly evaluates the evolving situation, it's clear that the ramifications of Super Micro's crisis are yet to be fully realized. Companies within and connected to Super Micro are exercising caution, striving to mitigate potential risks that could emerge from these developments.

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Brilliant_User_7673

11/05

$SMCI is buying at the open once more. Yesterday, I managed to secure some shares at a bargain price, 24.5 below today's opening. I've got some dry powder ready to go for more.

DutchAC

$SMCI ended my short position yesterday because of this concept called risk/reward ratio. This isn't some speculative stock headed for zero. Now that I'm long, the current price represents only a tiny fraction of its rightful value.

WickedSensitiveCrew

Let me break it down for those who are still confused about how $NVDA manages to generate revenues and cash flow. Here's the process: 1. $NVDA invests $X into startup A. 2. Startup A places an order for 10X worth of GPUs from $NVDA, with a $X upfront payment to $NVDA for the order — effectively, the same $X invested by $NVDA. 3. Startup A approaches lenders (banks or shadow lenders) and borrows 9X$, using the future GPUs from $NVDA as collateral. 4. $NVDA manufactures the GPUs and delivers them to Startup A, which uses the 9X$ borrowed to make payments. Now, you might be thinking that GPUs are a depreciating asset, and without revenue, Startup A won't be able to cover interest payments to the lenders. However, that's not a concern here. The reality is that Startup A might not have a viable business model and might not generate any meaningful revenue in the future. In some cases, they might just use an empty box to show that they have GPUs. But it doesn't matter, because $NVDA is able to manipulate the system and create the illusion of revenues and cash flow.

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