Super Micro Computer: Warning Signals Should Make This A Straightforward Sell

Summary:

• Despite strong revenue growth from AI-optimized server solutions, Super Micro Computer faces negative operating cash flow and is seeking additional capital, diluting shareholders.
• Concerns over internal controls and board independence led to EY’s resignation as auditor, though no fraud was found; new governance appointments are underway.
• Regulatory scrutiny from the U.S. Department of Commerce over AI chip exports to China adds to investor sentiment challenges.
• Given comparable valuation multiples, Dell presents a potentially safer alternative for AI server market exposure without SMCI’s governance and financial risks, in my view.

Super Micro Computer (NASDAQ:SMCI) has delivered strong revenue growth in 2024 TTM, with sales nearly doubling YoY, as surging AI demand fueled optimism for the data center market. However, the company also flashes signals that suggest shareholder trouble, in my view, including a negative $1.8

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