DOJ Investigates Super Micro Computer

(Reuters) – The U.S. Department of Justice is investigating Super Micro Computer (NASDAQ:SMCI), as reported by the Wall Street Journal on Thursday. This comes nearly a month after short-seller Hindenburg Research alleged “accounting manipulation” at the AI server maker.

Super Micro’s shares fell about 12% following the report.

The WSJ report, citing sources familiar with the matter, indicated that the probe is in its early stages. A prosecutor at a U.S. attorney’s office has reportedly contacted individuals who might hold relevant information.

According to the report, the prosecutor has requested information connected to a former employee who accused the company of accounting violations.

Last month, Super Micro delayed filing its annual report, stating it needed to assess “its internal controls over financial reporting,” just one day after Hindenburg disclosed a short position and made claims of “accounting manipulation.”

Hindenburg pointed to a three-month investigation that included interviews with former senior employees of Super Micro and litigation records. The allegations included evidence of undisclosed related-party transactions and failures to adhere to export controls, among others.

Super Micro has denied Hindenburg’s claims. On Thursday, the company declined to comment on the report, while the DOJ stated it cannot confirm or deny the existence of such a probe.

A review by Reuters of tender documents earlier this year revealed that Chinese entities acquired high-end Nvidia (NASDAQ:NVDA) chips embedded in server products made by various companies, including Super Micro, through resellers. The U.S. government has been tightening restrictions on the sale of such technology to China.

Super Micro has benefited significantly from the generative AI boom, as businesses invest in the technology required for applications like ChatGPT. Its market value surged to $67 billion in March from about $4.4 billion.

However, the rally in AI stocks has subsided, as investors recognized that returns on companies’ substantial investments might arrive slower than anticipated.