SMCI: "The Arms Dealer" for Nvidia (NVDA)

Summary

Nicole Petallides discusses Supermicro's challenges on the New York Stock Exchange, including a delayed 10-K filing and a potential Department of Justice investigation. Despite past issues with financial reporting, Supermicro's stock had soared to $1,229 in March before dropping to $414. Analyst Matthew Bryson from Wedbush Securities shares his cautious stance, noting the company's previous delisting and the uncertainty surrounding the DOJ probe. Bryson also highlights Supermicro's past success in AI server supply, positioning it well before recent troubles. He mentions a stock split and provides insights into ongoing trends in tech and AI, recommending companies like Nvidia, Taiwan Semi, Seagate, and Western Digital.

Takeaways

• 📉 **Stock Performance**: Supermicro's stock experienced a significant drop from $1,229 in March to $414 before a stock split.
• 🔍 **Investigation**: The Department of Justice is investigating Supermicro based on a whistleblower's report, but specifics are unknown.
• 📈 **Financial Reporting Issues**: Supermicro has delayed reporting its financials, specifically the 10-K form, which raises concerns.
• 🏢 **Historical Precedent**: Supermicro was previously delisted due to financial restatements, but the impact on total revenues was minimal.
• 🤔 **Uncertainty**: There is uncertainty regarding the current situation's impact on Supermicro's stock and business.
• 📊 **Stock Split**: Supermicro is undergoing a stock split, which is typically done to make shares more accessible to individual investors.
• 🚀 **AI Momentum**: Supermicro benefited from the AI boom, supplying servers to companies like Meta, positioning them well during the AI surge.
• 💼 **Executive Retaliation**: A former executive claimed retaliation from Supermicro after reporting issues with revenue recognition and allocation.
• 📈 **Market Trends**: There is ongoing strength in AI, with companies like Nvidia and Taiwan Semiconductor experiencing growth.
• 📈 **Buy Ratings**: Wedbush Securities has buy ratings on Nvidia, Taiwan Semiconductor, Seagate, and Western Digital due to strong market performance and trends.

Q & A

What is the current situation for Supermicro Corporation (SMCI)?

Supermicro is facing a delay in reporting their financials and is under investigation by the Department of Justice (DOJ), which has caused uncertainty and a drop in their stock price.

Why is Supermicro's delay in reporting their financials significant?

The delay in reporting financials, specifically the 10-K, is significant because it raises concerns about the accuracy and reliability of the company's financial statements.

What is the historical context of Supermicro's financial reporting issues?

Supermicro has faced financial reporting issues before, which led to them being delisted. However, the impact on their financials was minimal, with total revenues remaining unchanged.

What was the impact of the Wall Street Journal's report on Supermicro?

The Wall Street Journal reported on a potential DOJ investigation based on a whistleblower's account, which suggests Supermicro may have misrepresented their financials, causing further concern for investors.

What is the current stock price target for Supermicro according to Matthew Bryson?

Matthew Bryson has a price target for Supermicro, but he has not adjusted it for recent changes and admits it's hard to determine the stock's direction due to the ongoing investigation.

How did Supermicro's business model evolve to become successful?

Supermicro transformed its business model from being a second-tier server maker to supplying AI servers, particularly benefiting from the AI boom and being a supplier to companies like Meta.

What role did Supermicro play in the AI server market?

Supermicro was a significant player in the AI server market, supplying servers to companies like Meta, which gave them a competitive advantage during the AI boom.

What is the significance of the stock split for Supermicro?

The stock split is seen as a move to make investing more accessible to individual investors, but it does not address the core issues surrounding Supermicro's financial reporting and the DOJ investigation.

What are the potential outcomes of the DOJ investigation for Supermicro?

The potential outcomes range from the investigation concluding with minimal impact to a prolonged period of financial restatement, which could lead to more significant issues for the company.

What other tech or AI-related stocks does Matthew Bryson recommend?

Matthew Bryson recommends Nvidia, Taiwan Semiconductor Manufacturing Company (TSMC), Seagate, and Western Digital, citing strength in AI and semiconductor manufacturing.

What trends is Bryson seeing in the tech and AI sectors?

Bryson sees continued strength in AI, with Nvidia and TSMC being key players due to their roles in the AI and semiconductor industries, respectively.