Investigation of Super Micro Computer by the DOJ

Date: [Original Date Not Provided]
Source: Investing.com

Super Micro Computer (NASDAQ:SMCI), a prominent company in the artificial intelligence server market, is under investigation by the U.S. Department of Justice (DoJ), according to a report by the Wall Street Journal (WSJ).

Background of the Probe

The investigation stems from allegations made by activist short-selling firm Hindenburg Research, which expressed concerns regarding the company’s accounting practices. The WSJ reported that the inquiry is in its early phases, with prosecutors from the U.S. attorney’s office in San Francisco seeking information pertinent to the case.

Whistleblower Lawsuit

The investigation appears to connect with a whistleblower lawsuit filed in April by Bob Luong, a former employee. Luong claims that Super Micro engaged in accounting violations, alleging improper revenue recognition from 2020 to 2022. This includes making sales bookings for transactions that had not been completed and shipping incomplete equipment to customers.

Impact on Stock and Financials

Super Micro, recognized for its servers leveraging Nvidia (NASDAQ:NVDA) chips for generative AI, experienced a significant stock surge during the AI boom but has seen its value decline after reaching a high of $66 billion earlier this year. Following the WSJ report, SMCI shares fell approximately 12% on Thursday.

Additional Allegations

In its August report, Hindenburg also pointed out transactions involving Super Micro and entities owned by CEO Charles Liang’s family, along with alleged shipments to Russian firms, which may contravene U.S. sanctions. Subsequently, Super Micro announced a delay in filing its annual report and has established a board committee to evaluate internal controls.

Company’s Response

In a letter to customers dated September 3, Liang defended Super Micro, dismissing allegations in the short-seller’s report as “false or inaccurate.” The company has also requested that Luong’s lawsuit be moved to arbitration, with a court hearing scheduled shortly.