By Super Micro Computer Inc. (NASDAQ: SMCI) saw its shares drop more than 5% on Friday after the artificial intelligence-focused server maker reiterated weaknesses in its internal control over financial reporting.
The disclosure, made in a regulatory filing late Thursday, raised renewed concerns about the company’s governance and ability to deliver timely and accurate financial results.
The selloff put Super Micro on track to shed more than $1 billion from its roughly $26 billion market capitalization if the losses persist.
Internal control issues resurface
In its annual report for the fiscal year ended June 30, Super Micro repeated warnings first flagged in its May quarterly filing, cautioning that the unresolved problems could “adversely affect” its reporting of operational results.
The company added that it continues to work on addressing the deficiencies.
The issue is not entirely new for the San Jose-based server manufacturer.
Last year, Super Micro failed to meet an August deadline to file its annual report.
The delay, followed by the October resignation of its auditor Ernst & Young LLP, fueled skepticism among investors and analysts about the company’s governance and transparency practices.
Although Super Micro eventually filed its long-delayed report earlier this year, the repeated cautionary language has once again pressured investor sentiment.
Valuation and analyst outlook
Despite the disclosure, Super Micro remains a significant player in the high-demand market for servers optimized for artificial intelligence workloads.
The company currently trades at 16.28 times its forward 12-month earnings estimates, according to LSEG data.
That valuation is notably higher than some of its peers, including Dell Technologies Inc. (NYSE: DELL), which trades at 13.12 times earnings, and Hewlett Packard Enterprise (NYSE: HPE), at 10.81 times.
Analyst sentiment on the stock remains divided. Of the 19 brokerages covering Super Micro, seven maintain a “buy” rating, nine suggest “hold,” and three recommend “sell.”
The median price target for SMCI shares is $49, according to LSEG.
The mixed outlook underscores both the opportunities and risks tied to the company’s position in the growing AI infrastructure market, coupled with ongoing governance concerns.
Industry context and rival moves
Super Micro’s disclosure came on the same day rival Dell reported disappointing stock performance.
Dell shares dropped about 10% on Friday, as higher manufacturing costs for AI-driven servers and intensifying competition weighed on its outlook.
While Dell reaffirmed robust demand forecasts for AI infrastructure, investors appeared cautious about profit margins in the increasingly crowded space.
The parallel declines highlight the pressures facing server makers as they navigate surging demand for AI technology alongside challenges in cost management, competition, and regulatory scrutiny.
For Super Micro, the combination of strong market demand and internal financial control concerns presents a complex investment profile—one that leaves analysts and investors divided heading into the second half of the year.
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