Super Micro’s $50 billion stock collapse underscores risk of AI hype
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.
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.”
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
The world of enterprise AI is dominated by U.S. names from Microsoft to Salesforce, but Europe has a major player that is pushing hard into the space: SAP.
In an exclusive interview with CNBC’s “Europe Early Edition,” SAP CEO Christian Klein said that AI is “the number one reason” why customers are signing deals with the firm.
“After we close Q4, actually, 80, 85% of our revenue for next year is already done. So, [a] good pipeline for Q4 and with that, when we close out the year, our customers, also our investors, can expect there’s also very positive output,” he said.
SAP’s cloud backlog rose 23% in the third quarter to 18.8 billion, the company said in an earnings statement published late on Wednesday.
“I was pretty optimistic last night, and I’m still optimistic as the pipeline looks good,” Klein said. “We actually now have our biggest quarter.”
Revenue rose 7% to 9.08 billion euros ($10.53 billion), slightly below expectations of 9.15 billion euros, according to consensus figures compiled by LSEG. However, it saw gains of 22% in its cloud revenue, with Klein citing increasing AI and data cloud market share as the reason for the revenue jump.
Deutsche Bank said the firm remains a “top pick” in the European tech and global software sector, however it noted that SAP is now guiding toward the lower-end of its forecast for cloud revenue of 21.6 billion euros to 21.9 billions euros this year.
“Against an environment of lengthening deal cycles and pushouts … SAP continues to execute very well, in our view, even if delays in deal closings have led the company to guide to the lower end of its Cloud revenue growth range for FY25,” Deutsche Bank analysts said in a note led by Johannes Schaller.
SAP’s shares were initially 2% higher at the start of the trading session on Thursday, but later pared gains to trade 2.5% lower. The stock is down 3% year-to-date.
Europe’s AI playbook
SAP briefly became Europe’s most valuable company in March, riding the tailwinds of enthusiasm and gains in the German stock market.
The European Union has faced criticism for its legislative approach to AI, with some businesses calling for deregulation in efforts to catch up in the global AI race. Klein said he’s not sure if the bloc is adopting the right strategy compared with the U.S. approach of, “give me your AI, let’s test it, let’s refine it, let’s optimize it over time.”
The chief executive said he is laser-focused on creating value, explaining that it is “100%” what customers are looking for. It echoes the message of other AI firms and investors in Europe, given that the U.S. and China currently dominate the training of large language models, which is the infrastructure needed for AI. However, the general sentiment is that Europe has a chance to be a leader in putting it to use.
The training large language models is now a “commodity,” Klein said, adding that he expects the application of AI will become an increasing priority for businesses and SAP’s bet on this will be reflected in its share price in the future.
“It’s super important that we are not only selling into a hype, but that we see real adoption,” Klein said.
SAP has some exposure to China through partnerships that allow it to work “in China, for China,” due to geopolitical tensions, Klein noted. The country’s speed of AI development, low regulation and talent pool makes it hard to ignore, he said.
The company offers cloud solutions, expenses, and supply chain management and analytics to corporates. It underwent a large restructure in 2024 and pivoted towards AI services, which is now being used across the likes of finance and supplier sourcing.
Technology
Quantum computing stocks surge on report Trump administration seeking stakes, joining Intel, rare earths
Parts of the IBM Quantum System Two are displayed at IBM Thomas J. Watson Research Center in Yorktown Heights, New York on June 6, 2025.
Angela Weiss | Afp | Getty Images
The Trump administration is in talks with several quantum-computing firms about giving the Commerce Department equity stakes in exchange for federal funding, the Wall Street Journal reported on Wednesday.
The Journal, citing anonymous sources familiar with the matter, said the companies include IonQ, Rigetti Computing and D-Wave Quantum. Other firms, such as Quantum Computing Inc. and Atom Computing, are considering similar arrangements, it added.
IonQ and D-Wave shares each jumped 9% in early trading Thursday. Rigetti added 7%. Quantum Computing was up 11%.
The news aligns with recent efforts by Washington to take stakes in major companies within industries seen as vital to U.S. national security, especially those receiving public funds.
One of the earliest examples under U.S. President Donald Trump’s second term came when the Defense Department invested $400 million in American rare earths company MP Materials for about a 15% stake in the company.
A month later, the government took a roughly 10% stake in semiconductor firm Intel — the only American company capable of making advanced AI processors on U.S. soil.
IonQ, 1 day
The stakes in quantum computing companies would come with minimum funding awards of $10 million each, according to the Journal, citing people familiar with the matter. Other technology companies are also expected to compete for the grants.
An interventionist shift in Washington
The U.S. government’s growing interest in taking stakes in private companies is quite unprecedented in recent decades, especially outside of a financial crisis, signaling an ideological shift toward greater intervention in certain industries.
However, the Trump administration will not take stakes in nonstrategic industries, Treasury Secretary Scott Bessent told CNBC in an exclusive interview on Oct. 15. “We do have to be very careful not to overreach,” he said.
Trump and Commerce Secretary Howard Lutnick have argued that the government should benefit from a company’s success in cases where federal funds have played a role in its growth.
The targeted industries also appear to reflect Washington’s focus on technological and economic competition with China.
The U.S. stake in MP Materials, for example, came after China restricted exports of rare earth elements —essential components in high-tech products — prompting Washington to boost efforts to build its domestic supply chain.
Intel’s funding also aligns with U.S. efforts to strengthen its domestic semiconductor industry to support its broader race for dominance in artificial intelligence.
Quantum computing, which utilizes quantum mechanics to solve problems beyond the capabilities of today’s most supercomputers, is likely viewed as one of the next strategically critical technologies for Washington to focus on, due to its massive economic and security implications.
Experts believe that the advanced tech could revolutionize fields including medicine, finance, and materials science by solving complex problems currently impossible for traditional computers, and pose major cybersecurity threats if it falls into the hands of adversaries.
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