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Short-seller Hindenburg Research published a scathing report accusing Super Micro Computer SMCI of accounting red flags and questionable business dealings, including potential sanctions evasion from exports to Russian and Chinese firms.
Over the course of three months, Hindenburg carried out an investigation into Super Micro, a provider of AI server and computer infrastructure. It found “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues,” according to a report released Tuesday.
Super Micro was briefly delisted from the Nasdaq in 2018 for failing to file financial statements. Regulators later charged the company for “widespread accounting violations,” including improperly reporting revenue, and fined it $17.5 million. Less than three months later, however, Super Micro re-hired top executives that were directly involved in the scandal, Hindenburg alleged.
“All told, we believe Super Micro is a serial recidivist,” Hindenburg said in its report. “It benefitted as an early mover but still faces significant accounting, governance and compliance issues and offers an inferior product and service now being eroded away by more credible competition.”
Super Micro said in an email to Quartz that it “does not comment on rumors and speculation.” Quartz could not independently verify the report’s findings.
The San Jose, California-based firm lost its edge among major clients, including Nvidia NVDA, Tesla TSLA, CoreWeave and Amazon AMZN Web Services, Hindenburg claimed, with several of those companies instead opting for rival Dell’s DELL servers. Hindenburg disclosed that it was shorting Super Micro stock.
Hindenburg also accused Super Micro of maintaining, and expanding upon, its relationship with Russia, skirting U.S. sanctions imposed on several Russian companies following its February 2022 invasion of Ukraine. Since then, exports of Super Micro’s high-tech components to Russia have roughly tripled, according to Hindenburg’s review of more than 45,000 import and export transactions. The report detailed exports of Super Micro products totaling tens of millions of dollars since the start of the war to several sanctioned Russian entities.
Super Micro’s partnership with Chinese state-run telecommunication equipment firm Fiberhome was also called into question by Hindenburg. According to the investigation’s findings, Super Micro has sold approximately $196 million of “sophisticated computer components” to the joint venture since Fiberhome was watchlisted by the U.S. government in 2020.
Super Micro debuted on the S&P 500 in March, thanks to the same AI boom that gave Nvidia NVDA its now multi-trillion dollar market capitalization. Shares of Super Micro dipped 2% Tuesday afternoon, trading at $551.84. Super Micro stock is up 93% so far this year, with a $32.3 billion market cap.