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After riding a rollercoaster in 2024, Super Micro just suffered another setback.
The Chinese AI company DeepSeek just topped Apple's U.S. App Store download charts. DeepSeek's parent claims that its flagship AI model, R1, performs similarly to costly models like OpenAI with fewer resources.
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And the DeepSeek model is open-source, enabling developers worldwide to modify it.
This has hurt major AI players led by chipmaker Nvidia (NVDA) , which tumbled nearly 17% on Jan. 27. Super Micro Computer (SMCI) , a close partner of Nvidia, dropped 12.6%.
What happened to Super Micro in 2024?
Super Micro specializes in high-performance server hardware. The company integrates Nvidia's graphics-processing units into its servers, which are then supplied to clients like cloud service providers.
Almost a year ago, Super Micro was riding high. The company saw its stock peak in March 2024 as a darling in the AI and data center boom.
Related: Top analyst revisits Nvidia stock price target amid DeepSeek threat
Things were going so well that the company declared a stock split to make its shares more accessible to investors.
The trouble began, however, in late summer. On Aug. 27, short-seller Hindenburg Research released a report accusing Super Micro of what it called "glaring accounting red flags, evidence of undisclosed related-party transactions, sanctions violations, and customer troubles."
A day later, Super Micro said it would delay filing its Securities and Exchange Commission Form 10-K for the fiscal year ended June 30, fueling investors' concern.
Super Micro's then-auditor, Ernst & Young, resigned in October, citing governance and transparency concerns.
Super Micro appointed a special committee of the board and said it found “no evidence of misconduct” after investigation.
In December, Super Micro was dropped from the Nasdaq 100 index and replaced by Palantir Technologies.
Analysts remain bullish on AI stocks
Market jitters over AI-related stocks have intensified as the Nasdaq Composite shed 3% on Monday, but some analysts say the move might be overdone.
"We like to take advantage of opportunities when they present themselves, and as we continue to read and have conversations about DeepSeek, it is increasingly evident the market is overreacting," wrote long-time fund manager Chris Versace on TheStreet Pro. "Part of this stems from DeepSeek previewing its AI model in November of last year, which means it was already a known entity in AI circles last week when Stargate AI was announced, and Meta telegraphed its sizable capital spending increase for this year. That, along with concerns over data privacy, security and other factors tied to DeepSeek suggests the market is overreacting to today’s headlines."