Super Micro Computer (NASDAQ: SMCI) has emerged as one of the most volatile and closely watched stocks of 2024, embodying both the promise and pitfalls of the artificial intelligence boom.
Dramatic highs, devastating controversies, and a persistent connection to the expanding AI infrastructure market have marked the server manufacturer’s journey through 2024.
The company started 2024 with a spectacular rally, seeing its stock surge more than 300% in the first quarter before peaking in March. This initial enthusiasm was driven by Super Micro’s growing role in providing specialized servers for AI applications and its expanding partnerships with industry giants. The momentum seemed unstoppable until allegations of impropriety emerged later in the year.
The narrative shifted dramatically when short-seller Hindenburg Research published a report alleging accounting violations and export restriction evasions. The fallout was swift and severe, with the company delaying its annual report filing and watching its stock plummet by 25%.
The situation worsened when the Department of Justice opened a preliminary probe in September, followed by the resignation of Ernst & Young, the company’s auditors, in October, citing serious concerns over internal controls and accounting practices. This series of events erased a third of the company’s market value.
SMCI in 2024
Despite these setbacks, 2024 also marked significant institutional recognition for Super Micro Computer. The company achieved two major index inclusions, joining the S&P 500 after its market capitalization grew from $4.5 billion to $60 billion by March, and later securing a spot in the Nasdaq-100 in July, replacing Walgreens Boots Alliance.
The company also secured several strategic victories in the AI sector. Notable among these was being selected to provide half the servers for Elon Musk’s xAI startup and winning the contract to supply servers for Tesla’s Gigafactory Texas.
These partnerships, combined with increased demand for its large language model optimized AI systems featuring NVIDIA chips, demonstrated the company’s continued relevance in the AI infrastructure space.
Looking Ahead to 2025
As Super Micro Computer enters 2025, it faces both opportunities and challenges. The company maintains similar valuation metrics to early 2024, trading at 12.9 times forward earnings, and continues to benefit from strong AI computing server demand.
Its competitive edge in liquid-cooled technology, offering 40% energy savings, positions it well in the growing market for efficient AI infrastructure.
However, the path forward isn’t without obstacles. While Wall Street projects approximately 70% revenue growth for fiscal year 2025, analysts note potential hesitancy from institutional investors due to the recent accounting controversies.
The company’s ability to regain market confidence following the accounting allegations and auditor resignation may prove crucial in determining its performance in the coming year. As the AI infrastructure market continues to expand, Super Micro Computer’s success will likely depend on its ability to balance aggressive growth with restored credibility in its financial practices.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
