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Charles Liang, CEO of Super Micro Computer, during the AMD Advancing AI event in San Jose, California, on Dec. 6, 2023.

David Paul Morris | Bloomberg | Getty Images

In March, Super Micro Computer was added to the S&P 500 after an epic run that lifted the stock by more than 2,000% in two years, dwarfing even Nvidia’s gains.

As it turned out, S&P was calling the top.

Less than two weeks after the index changes were announced, Super Micro reached its closing high of $118.81 and had a market cap of almost $70 billion. The stock is down 72% since then, pushing the valuation to under $20 billion, the first major sign in the public markets that the hype around artificial intelligence may not all be justified.

Super Micro is one of the primary vendors for building out Nvidia-based clusters of servers for training and deploying AI models.

The stock plunged 33% on Wednesday, after the company disclosed that its auditor, Ernst & Young, had resigned, saying it was “unwilling to be associated with the financial statements prepared by management.” Super Micro is now at risk of being delisted from the Nasdaq, and has until Nov. 16 to regain compliance with the stock exchange.

“We see higher delisting risk in the absence of an auditor and the potential challenge to getting a new one,” analysts at Mizuho, who have the equivalent of a hold rating on the stock, wrote in a report on Wednesday.

Ernst & Young was new to the job, having just replaced Deloitte & Touche as Super Micro’s accounting firm in March 2023.

A Super Micro spokesperson told CNBC in a statement that the company “disagrees with E&Y’s decision to resign, and we are working diligently to select new auditors.”

Representatives for Ernst & Young and Deloitte didn’t respond to requests for comment.

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Super Micro vs. Nvidia

For much of Super Micro’s three decades in business, the company existed well below the radar, plodding along as a relatively obscure Silicon Valley data center company.

That all changed in late 2022 after OpenAI’s launch of ChatGPT set off a historic wave of investment in AI processors, largely supplied by Nvidia. Along with Dell, Super Micro has been among the big tangential winners in the Nvidia boom, packaging up the powerful graphics processing units (GPUs) inside customized servers.

Super Micro’s revenue has at least doubled in each of the prior three quarters, though the company hasn’t filed official financial disclosures with the SEC since May.

Wall Street’s mood on the company has shifted dramatically.

Since the S&P’s announced index changes in March, Super Micro’s stock has dropped at least 10% on six separate occasions. The most concerning slide, prior to Wednesday, came on Aug. 28, when the shares sank 19% after Super Micro said it wouldn’t file its annual report with the SEC on time.

“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,” the company said.

Noted short seller Hindenburg Research then disclosed a short position in the company, and said in a report that it identified “fresh evidence of accounting manipulation.”

‘Clock ticking’

The following month, Super Micro said it had received a notification from Nasdaq, indicating that the delay in the filing of its annual report meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline would be mid-November.

It wouldn’t be the first for Super Micro. The company was previously delisted by the Nasdaq in 2018.

Wedbush analysts see reason for worry.

“With SMCI having missed the deadline to file its 10K and the clock ticking for SMCI to remedy this issue, we see this development as a significant hurdle standing in the way of SMCI’s path to filing in time to avoid delisting,” the analysts, who recommend holding the stock, wrote in a report.

As Super Micro’s stock was in the midst of its steepest selloff since 2018 on Wednesday, the company put out a press release announcing that it would “provide a first quarter fiscal 2025 business update” on Tuesday, Nov. 5.

That’s Election Day in the U.S.

Super Micro’s spokesperson told CNBC that the company doesn’t expect matters raised by Ernst & Young to “result in any restatements of its quarterly financial results for the fiscal year ended June 30, 2004, or for prior fiscal years.”

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Beyond Super Micro, the evolving incident is a potential black eye for S&P Dow Jones. Since Super Micro replaced Whirlpool in the S&P 500, shares of the home appliance company are down about 3%, underperforming the broader market but holding up much better than the stock that took its place.

Inclusion in the S&P 500 often causes a stock to rise, because money managers tracking the index have to buy shares to reflect the changes. That means pension and retirement funds have more exposure to the index’s members. Super Micro shot up 19% on March 4, the first trading day after the announcement.

A spokesperson for S&P Global said the company doesn’t comment on individual constituents or index changes, and pointed to its methodology document for general rules. The primary requirements for inclusion are positive GAAP earnings over the four latest quarters and a market cap of at least $18 billion.

S&P is able to make unscheduled changes to its indexes at any time “in response to corporate actions and market developments.”

Kevin Barry, chief investment officer at Cantata Wealth, says greater consideration should be given to a stock’s volatility when additions are made to such a heavily tracked index, especially given that tech already accounts for about 30% of its weighting.

“The chances of a stock going up 10 or 20 times in a year or two and then having an indigestion moment is extremely high,” said Barry, who co-founded Cantata this year. “You’re moving out of a low volatility stock into a higher volatility stock, when tech already represents the largest sector by far in the index.”

— CNBC’s Rohan Goswami and Kif Leswing contributed to this report

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Intuit shares drop as quarterly forecast misses estimates due to delayed revenue

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Intuit shares drop as quarterly forecast misses estimates due to delayed revenue

Intuit CEO Sasan Goodarzi speaks at the opening night of the Intuit Dome in Los Angeles on Aug. 15, 2024.

Rodin Eckenroth | Filmmagic | Getty Images

Intuit shares fell 6% in extended trading Thursday after the finance software maker issued a revenue forecast for the current quarter that trailed analysts’ estimates due to some sales being delayed.

Here’s how the company performed in comparison with LSEG consensus:

  • Earnings per share: $2.50 adjusted vs. $2.35 expected
  • Revenue: $3.28 billion vs. $3.14 billion

Revenue increased 10% year over year in the quarter, which ended Oct. 31, according to a statement. Net income fell to $197 million, or 70 cents per share, from $241 million, or 85 cents per share, a year ago.

While results for the fiscal first quarter topped estimates, second-quarter guidance was light. Intuit said it anticipates a single-digit decline in revenue from the consumer segment because of promotional changes for the TurboTax desktop software in retail environments. While that will affect revenue timing, it won’t have any impact on the full 2025 fiscal year.

Intuit called for second-quarter earnings of $2.55 to $2.61 per share, with $3.81 billion to $3.85 billion in revenue. The consensus from LSEG was $3.20 per share and $3.87 billion in revenue.

For the full year, Intuit expects $19.16 to $19.36 in adjusted earnings per share on $18.16 billion to $18.35 billion in revenue. That implies revenue growth of between 12% and 13%. Analysts polled by LSEG were looking for $19.33 in adjusted earnings per share and $18.26 billion in revenue.

Revenue from Intuit’s global business solutions group came in at $2.5 billion in the first quarter. The figure was up 9% and in line with estimates, according to StreetAccount. Formerly known as the small business and self-employed segment, the group includes Mailchimp, QuickBooks, small business financing and merchant payment processing.

“We are seeing good progress serving mid-market customers in MailChimp, but are seeing higher churn from smaller customers,” Sandeep Aujla, Intuit’s finance chief, said on a conference call with analysts. “We are addressing this by making product enhancements and driving feature discoverability and adoption to improve first-time use and customer retention.”

Better outcomes are a few quarters away, Aujla said.

CreditKarma revenue came in at $524 million, above StreetAccount’s $430 million consensus.

At Thursday’s close, Intuit shares were up about 9% so far in 2024, while the S&P 500 has gained almost 25% in the same period.

On Tuesday Intuit shares slipped 5% after The Washington Post said President-elect Donald Trump’s proposed “Department of Government Efficiency” had discussed developing a mobile app for federal income tax filing. But a mobile app for submitting returns from Intuit is “already available to all Americans,” CEO Sasan Goodarzi told CNBC’s Jon Fortt.

Goodarzi said on CNBC that he’s personally communicating with leaders of the incoming presidential administration.

On the earnings call, Goodarzi sounded optimistic about the economy.

“Our belief, which is not baked into our guidance, is that we will see an improved environment as we look ahead in 2025, particularly just with some of the things that I mentioned earlier around just interest rates, jobs, the regulatory environment,” he said. “These things have a real burden on businesses. And we believe that a better future is to come.”

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Bluesky CEO Jay Graber says X rival is ‘billionaire proof’

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Bluesky CEO Jay Graber says X rival is 'billionaire proof'

Bluesky has surged in popularity since the presidential election earlier this month, suddenly becoming a competitor to Elon Musk’s X and Meta’s Threads. But CEO Jay Graber has some cautionary words for potential acquirers: Bluesky is “billionaire proof.”

In an interview on Thursday with CNBC’s “Money Movers,” Graber said Bluesky’s open design is intended to give users the option of leaving the service with all of their followers, which could thwart potential acquisition efforts.

“The billionaire proof is in the way everything is designed, and so if someone bought or if the Bluesky company went down, everything is open source,” Graber said. “What happened to Twitter couldn’t happen to us in the same ways, because you would always have the option to immediately move without having to start over.”

Graber was referring to the way millions of users left Twitter, now X, after Musk purchased the company in 2022. Bluesky now has over 21 million users, still dwarfed by X and Threads, which Facebook’s parent debuted in July 2023.

X and Meta didn’t immediately respond to requests for comment.

Threads has roughly 275 million monthly users, Meta CEO Mark Zuckerberg said in October. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates 318 million monthly users as of October.

Bluesky was created in 2019 as an internal Twitter project during Jack Dorsey’s second stint as CEO, and became an independent public benefit corporation in 2022. In May of this year, Dorsey said he is no longer a member of Bluesky’s board.

“In 2019, Jack had a vision for something better for social media, and so that’s why he chose me to build this, and we’re really thankful for him for setting this up, and we’ve continued to carry this out,” said Graber, who previously founded Happening, a social network focused on events. “We’re building an open-source social network that anyone can take into their own hands and build on, and it’s something that is radically different from anything that’s been done in social media before. Nobody’s been this open, this transparent and put this much control in the users hands.”

Part of Bluesky’s business plan involves offering subscriptions that would let users access special features, Graber noted. She also said that Bluesky will add more services for third-party coders as part of the startup’s “developer ecosystem.”

Graber said Bluesky has ruled out the possibility of letting advertisers send algorithmically recommended ads to users.

“There’s a lot on the road map, and I’ll tell you what we’re not going to do for monetization,” Graber said. “We’re not going to build an algorithm that just shoves ads at you, locking users in. That’s not our model.”

Bluesky has previously experienced major growth spurts. In September, it added 2 million users following X’s suspension in Brazil over content moderation policy violations in the country and related legal matters.

In October, Bluesky announced that it raised $15 million in a funding round led by Blockchain Capital. The company has raised a total of $36 million, according to Pitchbook.

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Alphabet shares slide 6% following DOJ push for Google to divest Chrome

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Alphabet shares slide 6% following DOJ push for Google to divest Chrome

Jaque Silva | Nurphoto | Getty Images

Alphabet shares slid 6% Thursday, following news that the Department of Justice is calling for Google to divest its Chrome browser to put an end to its search monopoly.

The proposed break-up would, according to the DOJ in its Wednesday filing, “permanently stop Google’s control of this critical search access point and allow rival search engines the ability to access the browser that for many users is a gateway to the internet.”

This development is the latest in a years-long, bipartisan antitrust case that found in an August ruling that the search giant held an illegal monopoly in both search and text advertising, violating Section 2 of the Sherman Act.

The potential break-up would include preventing Google from entering into exclusionary agreements with competitors like Apple and Samsung, part of a set of remedies that would last 10 years.

CNBC’s Jennifer Elias contributed to this report.

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