-42% in two days, -76% from peak-AI-mania in March 2024. There is some dark humor in those kinds of charts.
By Wolf Richter for WOLF STREET.
Shares of AI-mania highflyer Super Micro Computer, one of the many vendors that build servers based on Nvidia’s GPUs, plunged 33% on Wednesday, another 12% today in regular trading, and another 3% afterhours, for a combined plunge of 42.5% in two days, to $28.25, after having exploded by 1,500% from January 2023 and by 3,600% from January 2021, to peak-mania on March 13, 2024.
Since that all-time closing high of $118.81 (split adjusted), the stock has now kathoomphed by 76% and has thereby qualified for a pedestal in our Imploded Stocks – the first AI-mania stock to do so. Congratulations. And there’s room for more.
When looking at a chart like this, we cannot help but wonder: what the heck had gotten into these people? It’s like whatever. There is some dark humor in those kinds of charts that now fill our increasingly crowded pantheon of Imploded Stocks.
The two-day rug-pull came after Super Micro announced that its auditing firm, Ernst & Young, had resigned on October 24. The company had hired EY in March 2023 to perform the audit of fiscal year ended June 30. The audit of the fiscal year has not been completed, and there is still no audited annual report. And now there’s no auditor.
EY’s resignation letter, disclosed by the company in an SEC filing, stated brutally:
“We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.”
What smells particularly bad is that the noisy adversarial resignation of the auditor comes after short-seller Hindenburg Research had detailed a laundry list of allegations on August 27, including “glaring accounting red flags,” “accounting manipulation,” and “evidence of undisclosed related party transactions,” pointing out that “relationships with both disclosed and undisclosed related parties serve as fertile ground for dubious accounting,” and that these “relationships seem oddly circular.”
Hindenburg Research is a short-seller, so we take this stuff with a grain of salt. But EY’s resignation is bad after the Hindenburg allegations.
In the SEC filing, the company said that it “does not currently expect that resolution of any of the matters raised by EY, or under consideration by the Special Committee, as noted below, will result in any restatements of its quarterly reports for the fiscal year 2024 ending June 30, 2024, or for prior fiscal years.”
This whole series of rug-pulls – interrupted by smaller ups and downs – had commenced ominously on April 19 with a 23% plunge, after the company skipped announcing the preliminary results that had been expected ahead of its official earnings results. It was the first big get-the-heck-out moment for a ridiculously priced AI-mania stock.
On August 27 came the Hindenburg allegations. On August 28, the company announced in an SEC filing that its annual report, due on August 29, would be delayed further, and the stock tanked further.
“Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024,” it said at the time ominously.
And the company still hasn’t filed its audited annual report. The Nasdaq has given it a 60-day extension to file the report by November 27. And now its auditor that was supposed to audit that report has quit.
On September 6, the WSJ reported that the Department of Justice was investigating Super Micro over accounting issues, according to sources, and the stock tanked 12%.
Accounting issues are bad because those reported revenues and profits, that had helped shoot the shares to the moon, suddenly come into doubt.
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There is never just one cockroach!
I wish I knew all the insider stories. Could barely a fun read.
This was one of Jim Cramer’s favorite picks on CNBC. The Bear Sterns promoter does it again.
Wishful thinking this can be a preview for Nvidia and Tesla soon enough, but likely this is the main driver for this plunge, another Enron wannabe. Unless the same thing can be said about Nvidia or Tesla, we might still be a long way off for rapid descent. Although I remember reading something about Tesla and there’s some funny accounting there as well, didn’t dig into the details, probably another nothing burger..
My prediction the next one that will fall into this same pattern with be DJT, that one has been on quite a roller coaster ride for sure..
“The two-day rug-pull came after Super Micro announced that its auditing firm, Ernst & Young, had resigned on October 24. The company had hired EY in March 2023 to perform the audit of fiscal year ended June 30. The audit of the fiscal year has not been completed, and there is still no audited annual report. And now there’s no auditor.”
Why wish ill upon NVDA? TSLA, on the other hand….
C’mon Wolf SMCI was cooking the books. It’s like thinking the entire utility sector is a bubble just because Enron was doing fraud.
I know it’s fashionable to hate on AI at the moment, but just ignore the FUD. We’ve only just started.
Sorry your NVDA, which you hype here with every comment, was down 4.7% today. I didn’t mean to do that. It just happened.
On a more serious note, charts like these show that moon shots fall back to earth, accounting issues or not. There are over 1,000 stocks like this in our pantheon of Imploded Stocks. I don’t write about all of them, but sometimes I do, and it’s already a huge collection.
Feels like yesterday when Beyond Meat was covered on here and the gullible normies ate it up until it now crashed 87% from the high..yet after how many years now, we’re still talking about hype stock pretty often..seems like this market just go strength to strength between bubbles…guess in absence of a sentiment changing event like dot.com or 08, this party won’t stop anytime soon, wonder what’s next after AI? Back to bitcoin mining all over again?
I am hyping so that other people can get rich :] my cost basis is $70, and it’s easily worth $150+
I will sell if it hits $120 at earnings and post an apology on here
But it won’t, lol. It will be well past 150 by then :]
You don’t give one freaking iota about “other people” 🤣 You’re hyping NVDA so that they will buy NVDA so that they will drive up the price further, so that your position gains in value, so that you can then dump it into their lap and walk away with your fiat profit, and to heck with these “other people.” It’s always the same BS.
Thesis: the low hanging fruit from computers has been harvested or harnessed and while progress will continue it will be slower.
Example: older folks will recall banking hours when the bank closed at 3 PM. Then the real work began for the next 2 hrs as the staff posted, or processed each transaction MANUALLY. I said older.
No doubt AI will continually improve its assistance to banking, but it’s not going to be that degree of assist.
It is comparable to the tractor arriving on the farm. Ag is now so mechanised, with computer help, that large ops run with a handful of workers. But we aren’t going to get another bump of this scale, which would mean no workers. Because stuff screws up.
Similar with inventory. You ask if an item is in stock and the guy checks the computer. He doesn’t go and check the shelves, although you won’t know for sure until he goes to get it. Because the computer can lie, or be unaware of ‘shrinkage’, aka theft. Imagine a Walmart running without computer inventory.
There will be exceptions to this general thesis. Apparently in bio- medical the creation of new molecules is an AI app. Maybe it keeps on twisting a Rubic’s cube of atoms until it gets results. I don’t know much about it.
All I know is that the impact of computers so far is a tough act to follow.
PS: Was Hindenburg’s ‘expose’ a factor in E@Y’s resignation? Or did they already know there were ‘issues’ but just played along until Hind blew the whistle?
So what do we think about NVDA? Hold or sell?