Super Micro Computer shares plunge after EY resigns as auditor

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Shares in Super Micro Computer, which enjoyed a blistering rally off the back of the hype surrounding artificial intelligence, fell more than 30 per cent on Wednesday after the server maker said EY had resigned as its auditor.

EY told Super Micro it was “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”, according to a filing with the Securities and Exchange Commission on Wednesday.

EY had in late July told Super Micro’s audit committee that it had “concerns about several matters relating to governance, transparency and completeness of communications to EY, and other matters pertaining to the company’s internal control over financial reporting”, the filing said.

Super Micro, which is a key partner to AI chipmaker Nvidia, in late August said it would delay the release of its results for the fiscal year ended June 30 2024. A day earlier, a short seller issued a report alleging accounting manipulation at the company.

Super Micro had hired EY in the middle of last year, and the accounting firm was conducting its first audit of the company. Deloitte had been Super Micro’s auditor for the previous 20 years, most recently giving a clean bill of health to the company’s accounts in its last published annual report in August 2023.

Super Micro said it disagreed with EY’s decision to resign, which comes during an independent review of its internal controls and governance led by law firm Cooley and forensic accounting firm Secretariat Advisors. It “does not currently expect” any restatement of its financial results.

“Nevertheless, the company has taken the concerns expressed by EY seriously,” it said, as it awaits the findings from the review.

Silicon Valley-based Super Micro has been one of the biggest beneficiaries of investor enthusiasm for suppliers of AI infrastructure — the “picks and shovels” of the AI gold rush.

Its shares soared more than 1,000 per cent between the start of 2023 and their peak in March this year, driven largely by its relationship with $3.4tn AI chipmaker Nvidia. However, Super Micro has lost about two-thirds of its value since March.

Wednesday’s drop wiped about $8bn from its market capitalisation, which stands at around $20bn.

Super Micro packages into server systems GPU chips, which are used to accelerate AI, from Nvidia, as well as its rivals such as Intel and AMD.

AMD was down 9 per cent in early trading in New York on Wednesday, after it issued revenue guidance that failed to meet Wall Street’s expectations. Shares in Nvidia also fell as much as 3 per cent.

Big Tech companies are spending tens of billions of dollars on chips and servers as they build out new data centres for AI. In August, Super Micro reported sales in its most recent financial year had more than doubled to $14.9bn, and said revenues could double again in its 2025 fiscal year.