Could Super Micro Computer be the biggest comeback story of 2025?

Super Micro Computer (SMKI 11.62%) Investors have been on a roller coaster ride in 2024. The price started the year at about $28 per share and soared to nearly $120 in March. It has since given up all of those gains and is now trading at the same level it started the year at, although it fell to around $21 just a few days ago.

It’s a blow that most investors don’t expect to see, but there is good reason for the rise and fall of Supermicro (as the company is often called by its short name). With the stock now down about 75% from its all-time high, can we expect it to make a comeback in 2025?

Demand for AI drives Super Micro Computer’s business boom

Supermicro manufactures components for data centers and computing servers and also sells entire servers. One of the company’s advantages is that it makes liquid-cooled servers that are significantly more energy efficient and reduce the size of the room they need to be placed in since they don’t require the same amount of airflow as traditional servers.

These advantages led to a surge in demand for its products throughout 2024 as companies raced to ramp up computing power to meet the enormous demand for artificial intelligence (AI). As a result, revenue grew sharply in 2024, with growth exceeding 100% in many quarters.

SMCI (TTM) Revenue Data from YCharts; TTM = last 12 months.

That is, if you can trust what management has told you. While Supermicro’s fall came in part from rising too far, too fast, much of its fall came from allegations of accounting fraud.

Can you trust what management tells you?

It all started when the famous short-selling company Hindenburg Research published a short report on Supermicro. Short sellers make money when the stock price falls, so their intentions are not always pure, and Hindenburg has had several swings and misses.

His brief addressed accounting abuses for which Supermicro was fined by the Securities and Exchange Commission in 2020 due to accounting problems in 2018.

The day after the Hindenburg report, Supermicro issued a press release in which it said it was delaying the release of Form 10-K to year-end to evaluate “the design and operating effectiveness of its internal control over financial reporting.” The combination of these two news reports caused the stock to drop like a rock in a matter of days. The Wall Street Journal then reported that the Justice Department had opened an investigation into the company, causing shares to fall further.

At this point, Supermicro’s accounting practices were in question, but there was only speculation about whether real problems existed. However, Supermicro’s auditor, EY (formerly Ernst & Young), resigned because it said it “did not want to be involved” in what management reported.

Auditors have access to much more information than the average investor, and when they’re running for the hills, it might be wise to follow their lead. This caused the stock to fall further and wipe out all 2024 earnings.

With the stock falling so hard, investors could be forgiven for thinking this could be a great value play as there are still significant tailwinds for the business thanks to artificial intelligence on the horizon. However, there are other considerations when it comes to stocks.

Even if Supermicro’s business continues to grow, there is no confidence in management. As a result, many institutional investors will avoid the stock entirely, making it difficult for the share price to rise as there is not much money to move the price.

Trusting a company’s statements to investors is paramount when investing, and there’s no reason to do so with Supermicro right now.

A new management team can be key to restoring that trust. However, since CEO Charles Liang is the founder, president, CEO and chairman of the board, this is unlikely to happen.

But there is a new chapter in the Supermicro story. He appointed BDO, a large and reputable firm, as his new auditor and developed a plan to timely file Forms 10-K and 10-Q for the first quarter. The news sent the share price up by around 30%, which could spark huge gains if investors start to trust the company. However, the addition of a new auditor does not mean that Supermicro’s financial performance will immediately improve. There may still be reporting issues.

Super Micro Computer could This will be a massive comeback story in 2025. However, I still think it’s best for investors to avoid the stock as there are too many unknowns right now and things could get a lot worse before they get better. There are much better investments than taking on significant risk with Supermicro, and I would put my dollars into these other stocks first.