Super Micro Computer Stock is Soaring Today, But Is It a Buy?

Super Micro Computer (SMCI) stock is having another great day, up 14% this afternoon after racking up gains of 14% on Monday and 31% on Tuesday. Investors have been celebrating this week’s news that SMCI submitted a compliance proposal to Nasdaq, aiming to prevent a delisting caused by delayed financial filings and the resignation of its previous auditor. This strategic move was bolstered by the appointment of a new auditor, BDO, which temporarily eased investor concerns.

Last night, Super Micro scored a potentially even more crucial vote of confidence when Nvidia (NVDA) CEO Jensen Huang named the artificial intelligence (AI) server maker as one of the “great partners” involved in his company’s supply chain. Previously, reports had indicated that Nvidia, which dominates the AI chip market, was shifting orders away from SMCI to avoid potential supply disruptions.

SMCI has now clawed its way back into the green on a YTD basis, up about 4% for 2024. The stock is down 79% from its March highs, and - valued at less than 10 times forward adjusted earnings - trades at a significant discount to the broader tech sector.

However, it’s worth pointing out that Super Micro Computer still faces unresolved accounting issues and a Department of Justice investigation. While there’s the potential for a long-term recovery if regulatory challenges are resolved, Barron’s reports that SMCI’s newly retained accounting firm is “struggling to restore its own reputation” after a string of audit deficiencies. 

For now, investors should remain cautious when it comes to Super Micro Computer stock, which seems best suited for those who have a higher appetite for risk.