Algorithmic glitch

Good morning, hardworking analysts. This is your Stock Market Rundown for September 13th, 2024. Thanks for joining me. Let’s dig in:

TODAY’S TOP STORY: INFLATING THE A.I. BUBBLE

Super Micro Computer, based in San Jose, California, has what sounds like a pretty boring business: manufacturing high-performance servers and equipment for enterprise data centers. 

Falling asleep yet? Well, here’s something to perk up about: Super Micro is BFFs with Nvidia. Yep, that Nvidia—the poster child of the artificial intelligence revolution. 

Nvidia’s graphics processing units are a key component in Super Micro’s server and storage solutions, which are used in cutting-edge AI systems. Being linked to the super-buzzy AI trend swelled Super Micro’s market capitalization from $4 billion in 2022, to $60 billion by early 2024—a tidy tenbagger.

But lately, Super Micro’s stock price has short-circuited like an overheated processor. A well-known short seller, Hindenburg Research, published a damning report saying it uncovered accounting red flags and other unethical behaviour by management. 

(Quick refresh on short sellers: they make money by betting against a stock, then publicizing their views to profit from a decline in the stock price. Management teams hate ‘em, but they often serve a critical function in exposing corporate shenanigans.)

And this isn’t the first time Super Micro has been accused of keeping sloppy books. In 2020 it ponied up $17 million in fines to the SEC to settle charges of “widespread accounting violations.” 

Super Micro clapped back at Hindenburg’s claims, calling them “false” and “inaccurate”, but then just a few days later, disclosed they would delay filing their annual statements—not exactly a sign of top-notch accounting standards. 

Thanks to management glitching out and margins sagging, Super Micro’s market cap has been chopped in half from its peak. Anxious investors will have to wait and see whether Super Micro will reboot itself… or if it’s trapped in an irrecoverable error.

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SO WHAT ELSE IS GOING ON?

• Rumors of the death of the internal combustion engine have been greatly exaggerated. With sales of electric vehicles slumping worldwide, Toyota has cut its EV output plans by a third.

• US government officials are worried that Chinese drone use on American farms could pose national security risks. These drones are kind of like having a scarecrow that spies on you.

• Big Lots has some big-ass liabilities it can’t pay, so it’s preparing to file for bankruptcy. Upside: you might score deals on vacuums and nonstick cookware as the discount retailer shutters hundreds of locations.

• Kids just got a new place to “invest” their birthday money from grandma: Roblox is launching paid games and physical merchandise on its online platform. Doesn’t anybody play outside anymore?

That’s it for today, homeslices. Catch you on the flip side next week. Yours in capitalism, The Axe

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