AI server maker Super Micro Computer’s (SMCI) shares unraveled on Friday, plunging over 33% after it was hit by a $2.5 billion smuggling scandal. Following its assessment, Bernstein argued that the latest scandal “raises serious credibility issues that could impact [the California-based company’s] business.”
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Trade NVDA with leverageSuper Micro Computer Faces New Scandal
On Thursday, the U.S. filed charges against Wally Liaw, a co-founder and board member of Super Micro Computer. The indictment also names a company contractor and another employee, with the U.S. Attorney’s Office accusing all three of smuggling AI servers containing Nvidia chips to China, in violation of U.S. export control rules.
In a statement, Super Micro Computer clarified that it is not mentioned as a defendant in the case, further arguing that the action contravenes company policy and compliance controls. Nonetheless, Bernstein’s five-star analyst Mark Newman contended that the scandal raises tough questions about internal operations at the AI server company.
Newman, in response to the development, reaffirmed his Market Perform (Hold) rating on SMCI and maintained his price target of $37, which implies about 68% upside.
Analyst Flags Possible ‘Systemic Compliance Gaps’
Newman rested his bearish case on two points:
- February 2025 fraud case: The analyst pointed to a case filed in February last year in which three “rogue employees” of Super Micro Computer were alleged to have conspired to lie about the fact that their AI server exports — servers containing Nvidia GPUs — were bound for China.
- Rehiring of Liaw: The analyst also flagged the rehire and board reappointment of Wally Liaw in 2023 despite his resignation in 2018 over an accounting scandal. Newman also pointed to Liaw being named in a 2024 lawsuit that alleged improper revenue accounting at Super Micro Computer.
“The key question is whether this is an isolated case of ‘rogue employees’ or evidence of systemic compliance gaps inside Supermicro’s global sales and channel operations,” Newman queried.
The analyst mulled whether chipmaking giant Nvidia (NVDA) may now feel compelled to put greater distance between itself and Super Micro Computer.
Is SMCI a Good Buy Right Now?
On Wall Street, Super Micro Computer’s shares remain a Hold based on analysts’ consensus rating. This is based on three Buys, six Holds, and three Sells assigned by 12 analysts over the past three months.
However, the average SMCI price target of $38.89 implies about 76% upside from current trading levels.
