There has been no other company in the artificial intelligence (AI) realm that’s been watched as closely as Nvidia (NASDAQ: NVDA) over the last couple of years. Nvidia’s role in the AI narrative is so prominent that any announcement the company makes has the power to swing the capital markets at this point.
As the company’s upcoming launch of its new Blackwell graphics processing unit architecture (GPU) looms, all eyes are on Nvidia and its partner network. Super Micro Computer (NASDAQ: SMCI) is one player that’s been a direct beneficiary of Nvidia’s booming GPU business over the last two years.
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However, some recent reporting suggests that Nvidia may be migrating away from its reliance on Supermicro’s IT infrastructure and looking for partnerships elsewhere.
Let’s break down the situation and assess what could be influencing Nvidia’s decisions. Moreover, I’ll explore how this news has been impacting Supermicro stock and what it could mean for investors in both the near and long term.
The launch of the Blackwell chips may be the most hyped-up AI event of 2024. Nvidia CEO Jensen Huang has boasted that demand for the new chipsets is “insane.” Meanwhile, Morgan Stanley‘s research team is forecasting $10 billion in sales from Blackwell just in the fourth quarter. While all of this is good news on the surface, there are some wrinkles unfolding in the background that smart investors should be keen on watching.
According to an article posted on Digitimes, Nvidia is said to be routing Blackwell orders away from Supermicro in favor of other IT architecture specialists.
The last couple of months have been brutal for Supermicro.
Back in August, Supermicro became the subject of a short report published by Hindenburg Research. Hindenburg alleges that Supermicro’s accounting controls are weak — essentially implying that something fishy could be going on with its bookkeeping and potentially the financial outlook of the company.
To be honest, I didn’t think much of Hindenburg’s allegations at the time. After all, short-sellers have a vested interest in seeing a stock price decline — which is exactly what happened following the short report.
However, Supermicro ended up delaying its annual report following the Hindenburg report. While this wasn’t the best look, I remained cautiously optimistic about Supermicro. But then, in late October, Supermicro filed an 8-K to notify investors that its auditor, big four accounting firm Ernst & Young, had resigned.
