NVIDIA Diverting Orders From Super Micro As A Potential Delisting, DOJ Probe Loom

 Super Micro Computer (SMCI), a retailer of high-performance servers and liquid-cooled AI racks, is NVIDIA's third-largest customer. Additionally, in what is a testament to the heretofore symbiotic relationship between these two entities, SMCI's biggest client is NVIDIA, and its second-biggest client is an entity that is backed by NVIDIA. Now, however, it appears that NVIDIA has had enough of Super Micro Computer's near-constant headaches, and is deliberately trying to create some much-needed distance.

To wit, Digi Times is reporting today that NVIDIA has begun redirecting its orders that were originally placed with Super Micro Computer to other suppliers. This development comes as SMCI is now contending with allegations of financial malfeasance, a preliminary DOJ investigation, the exodus of its second auditor in around 18 months, and an imminent de-listing from the Nasdaq exchange.

For the benefit of those who might not be aware, Super Micro Computer's travails began in August when Hindenburg Research detailed instances of alleged accounting fraud and corporate governance malfeasance in a detailed report. SMCI then delayed the filing of its annual report for the fiscal year that ended on the 30th of June, presumably in a bid to undertake an internal review. Do note that under the prevailing statutory requirements, SMCI's annual report had to be filed by the 30th of August.

Meanwhile, the DOJ has also reportedly launched an investigation into the affairs at Super Micro Computer, with a particular focus on the alleged accounting violations. As per Hindenburg Research's anecdotes, Super Micro Computer engaged in distribution channel stuffing by pushing products to distributors based on artificially inflated demand forecasts, undertook partial shipments to meet specific sales targets and inflated its total shipment count in the process, re-hired top executives responsible for "widespread accounting violations" that had resulted in a $17.5 million settlement with the SEC, and paid nearly a billion dollars over the past three years to non-arm's-length suppliers such as Ablecom and Compuware.

Finally, do note that the Nasdaq exchange recently warned Super Micro Computer of a potential de-listing action should it fail to file the requisite annual report by the 16th of November. That punitive action could come as soon as the 20th of November.

Meanwhile, as we noted in a dedicated post earlier today, Super Micro Computer has negotiated major changes to its loan agreement with Cathay Bank, with the firm now required to furnish audited financial statements by the 31st of December as opposed to the earlier covenant, which posited the 28th of October as the deadline for furnishing these financial documents.

https://wccftech.com/nvidia-starts-diverting-orders-away-from-super-micro-computer-smci-as-a-potential-delisting-and-doj-investigation-loom-large/