Super Micro Computer's stock price suffered a significant decline on Tuesday, falling 8.7% during the session. The reason lies in a report released by Hindenburg Research, a well-known short-selling agency. The report stated that after in-depth investigation, the agency found that Super Micro had several obvious warning signs in its accounting operations. Specifically, the report provides evidence that the company may have been involved in undisclosed related-party transactions and had lapses in compliance with sanctions and export controls. In addition, the report also mentions some issues related to customers. Affected by this news, the price of Super Micro's convertible bonds also fell.

Reasons for shorting

Hindenburg made its accusations against AMD clear in the report: "In summary, we believe AMD is a repeat offender. It has benefited from being an industry first mover, but it still faces significant accounting, governance and compliance issues, and it The inferior products and services offered are being eroded by more credible competitors."

Hindenburg said it conducted a three-month in-depth investigation and discovered and exposed a series of problems at Super Micro Computer Inc. (Super Micro Computer). The investigation, which included interviews with former employees and industry experts, litigation documents and a review of customs records, revealed apparent problems with the company's accounting practices, undisclosed related-party transactions, sanctions and export control lapses, and customer relationship management.

The report specifically noted that Super Micro agreed to pay a $17.5 million fine to the U.S. Securities and Exchange Commission in 2020 for widespread accounting violations. What is concerning, however, is that the company rehired executives involved in the accounting scandal just three months later, with nearly all of the executives fired over the irregularities returning to the company.

In addition, Hindenburg's research also found that Super Micro may promote products to distributors by fabricating demand forecasts and making up excuses for unshipped parts after completing partial shipments. This practice of increasing sales figures in the short term will have negative consequences in the long term. Seeing may cause inaccuracies in accounting records and lead to more serious financial problems.

In terms of insider transactions, the report disclosed Super Micro-affiliated vendors Ablecom and Compuware, which received a total of $983 million in business from Super Micro over the past three years, mainly by company CEO Charles Liang. Brothers control. Ablecom and Compuware's trading records show that since 2020, almost all of their products have been exported to Super Micro, further deepening doubts about corporate governance and compliance.

Growth bottlenecks revealed in AMD’s financial report

According to Super Micro Computer's latest financial report released on the 6th, it can be observed that the company's revenue growth has slowed down and profitability faces continued challenges. Specifically, the company's earnings per share (EPS) failed to meet market expectations, while gross profit margins also declined. Due to constraints on capacity expansion, margin improvement is expected to be slower in the short term.

Although the company beat revenue expectations, Supermicro's profit margins have been hurt recently due to rising server production costs and price competition from rivals such as Dell. Analysts have noted companies' heavy investments in supporting a new generation of artificial intelligence chips, including those sold by Nvidia. Additionally, Advanced Micro Computer's stock has felt pressure in recent months as investors expressed concern that large technology companies may reduce investment in artificial intelligence due to long payback periods.

The timing of short selling is intriguing. Will Nvidia be affected by this?

Media reports pointed out that the company’s stock became a popular choice among artificial intelligence investors some time ago due to strong market demand for artificial intelligence software support equipment, especially servers produced by AMD.

The timing of this short-selling is very intriguing. Nvidia is about to release a high-profile financial report, and investors generally expect its performance to continue its strong momentum. AMD has a close partnership with chip industry leader Nvidia, which provides AMD with the opportunity to expand revenue by taking advantage of the surge in demand for AI servers. The liquid cooling technology used by AMD in the field of high-power semiconductors has very close business ties with Nvidia. Coupled with the long-term personal friendship and cooperative relationship between the two founders, the bond between the two is even stronger. Therefore, Nvidia is likely to be affected by AMD being shorted.

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