Original Title: "Radiant Thunder! Overnight market cap plunged by 66 billion, Huang Renxun couldn't save the 'AI Monster Stock' Super Micro Computer | Titanium Media AGI"

In just one night, the 'AI Monster Stock' $Super Micro Computer (SMCI.US)$ stock price plummeted over 32%. A year ago, the company's stock price had soared by 1300%, with a market cap exceeding 50 billion USD, but now it faces a crisis, becoming a major 'radiant thunder' event in the chip sector.

On the evening of October 30th Beijing time, Super Micro Computer filed documents with the U.S. Securities and Exchange Commission (SEC). Ernst & Young (EY) announced on the 24th that they resigned as the auditors of Super Micro Computer, citing concerns about the company's governance and transparency.

"The reason for our resignation is that we recently noticed some information that has led us to no longer be able to rely on the statements of management and the audit committee, and we are also unwilling to be associated with the financial statements prepared by management, and we conclude that we will no longer be able to provide audit services in accordance with applicable laws or professional obligations." Ernst & Young stated in the document. Meanwhile, Super Micro Computer added in its statement that the company has begun to seek a new accounting firm.

Impacted by this news, on October 30th, Super Micro Computer's stock price plummeted by over 34% at one point, closing down by 32.68%, marking its largest drop since 2018, with a market cap decrease of 9.402 billion USD (approximately 66.904 billion RMB) overnight. Its market cap was around 60 billion USD in March this year, plunging by nearly 300 billion RMB (40.6 billion USD) in less than a year.

While other US chip stocks also fell across the board on October 30th. The Philadelphia Semiconductor Index fell by more than 3%, with chip giant AMD experiencing a sharp decline, with the largest intraday drop exceeding 10%. ASML Holding and Qualcomm dropped by over 3%, while Nvidia, Micron Technology, Taiwan Semiconductor in the US fell by over 1%, and Arm dropped by more than 2%.

Huang Renxun once referred to the CEO of Super Micro Computer as the "best salesperson", with the stock price soaring 1300% within a year.

It is reported that Super Micro Computer was founded by Chinese-American Charles Liang, headquartered in San Jose, California, USA. Its main products include servers, storage systems, etc. It is one of the top three server manufacturers globally, with manufacturing and operating centers in the Americas, Asia, and Europe, employing over 4000 staff worldwide. Nvidia, Meta, and Tesla are all customers of Super Micro Computer.

At the age of 66, Charles Liang, was once selected as one of the 25 most accomplished Chinese Americans by Forbes in the US. As of February 22, 2024, Charles Liang's personal wealth is $6.5 billion.

Unlike Huang Renxun, who immigrated to the US from a young age, Charles Liang is a native of Taiwan, China. He graduated from the Department of Electrical Engineering at Taipei Institute of Technology (predecessor of Taipei Tech) in Taiwan, and later in 1984, pursued further studies in the Department of Electrical Engineering at the University of Texas at Arlington. After graduating, Charles Liang worked in several computer companies, and from 1991 to 1993, he served as President and Chief Design Engineer at the mainboard design and manufacturing company, Micro Center Computing.

In the summer of 1993, Charles Liang decided to start his own business, founding Super Micro Computer in Silicon Valley with his wife, Liu Qiuzhu. Liu Qiuzhu still serves as Vice President and Board Member of the company.

At the beginning of the business, people were not bullish about it. At that time, his industry friends believed that his timing, location, and choice of the industry were all wrong. He later said, "I just had a strong belief and wanted to make the American dream come true." Charles Liang revealed that at that time, everyone focused on winning by product price, but he believed that product quality was the key, so he kept improving, hoping to produce products that satisfied Silicon Valley customers.

From the inception of Super Micro Computer, Charles Liang decided to provide a 'one-stop' service. In 1995, they introduced the world's first server motherboard that could support two CPUs, and shortly after, they developed a server motherboard that could support four CPUs; In 2022, Super Micro Computer formulated a strategy to fully transition to AI servers, entering the high-speed computing arena; In 2023, the company transitioned to the liquid cooling route, reducing datacenter operating expenses by over 40%, and its liquid-cooled server technology also gained favor from Nvidia.

As a core company of the 'nvidia circle', super micro computer has disclosed that through the new technology application of super micro computer, the computing density of data center will increase by 4 times. Now each server rack can accommodate up to 96 nvidia B200 GPU. At the same time, the company has deployed over 0.1 million liquid cooling solution GPUs for some super large artificial intelligence factories and cloud service providers, with power close to 12kw per server, and a single artificial intelligence rack generating over 100kw of heat.

Liang Jianhao previously predicted that globally, 20% or more data centers will require liquid cooling architecture to effectively cool AI servers.

Huang Renxun once praised Super Micro Computer, stating that Liang Jianhao is Nvidia's long-term partner and 'best salesperson,' pointing out the need for data centers to upgrade to more eco-friendly and efficient systems. It is expected that by 2030, new data centers will attract approximately $3 trillion in investments, and the demand for Super Micro Computer solutions will also increase significantly.

Following the rise of generative AI, Super Micro Computer's stock price soared. By the last trading day of 2023, its closing price reached $284.26, a more than 700% increase (7 times) from its lowest point in 2022 ($34.11, with a market cap of $1.893 billion). In early 2024, Super Micro Computer showed even more rapid growth, with its stock price surpassing the $1000 mark. Within 12 months, Super Micro Computer's stock price once surged by 1300%, far exceeding the 'Big Seven Tech Giants' of the US stock market, and it was once included in the S&P 500.

A well-known short-selling institution alleges that super micro computer is suspected of accounting manipulation, analysts believe it urgently needs to 'change leadership'.

However, the good times did not last. Starting in mid-2024, Super Micro Computer, this AI star stock, not only faced accusations from former employees, but also short-selling institutions stated that it was suspected of accounting manipulation, with 'obvious financial fraud,' internal control, and other major issues.

In July of this year, former Super Micro Computer employee Bob Luong accused the company of attempting to inflate its revenue to the federal court, followed by an investigation by the US Department of Justice. A month later, the well-known short-selling institution Hindenburg Research published a Super Micro Computer research report accusing the company of clear financial fraud, internal control, and customer problems.

The well-known short-selling institution Hindenburg, famous for exposing the lies of the then-thriving electric truck company Nikola, revealed a report causing Nikola's stock price to plummet by 40%, eventually leading to the founder's arrest. The institution also once targeted India's richest man, Adani, claiming that the companies he oversees have been manipulating accounts for decades. This alarmed the Indian parliament, causing Adani's market cap to evaporate by $150 billion.

Now, Xingdengbao is eyeing star stocks super micro computer in AI.

In the report, Xingdengbao pointed out that after three months of investigation, including interviews with former senior employees of super micro computer and previous litigation records, the company is believed to have significant accounting issues, undisclosed related party transactions, suspicions of intentionally circumventing sanctions and export controls, and customer issues.

First of all, sales personnel at Super Micro Computer will face significant sales pressure, so they try various ways to let dealers take up some of the inventory, or push problematic products to customers at the end of the quarter. At the same time, reports indicate suspicious transactions between Super Micro Computer and disclosed and undisclosed related parties. The disclosed related parties Ablecom and Compuware are controlled by the brothers of Super Micro Computer's CEO, Liang Jinhai. Liang and his wife also own a portion of Ablecom's shares. Over the past three years, these two companies have generated $0.983 billion in revenue from Super Micro Computer. Initially, Super Micro Computer provided these two companies with zero components, which they assembled and then sold back. Trade records show that almost 100% of business between the two companies is exported to Super Micro Computer, appearing to be a circular transaction that inflates income.

Furthermore, super micro computer's suppliers include two **** companies, one of which is led by Liang Jianhou's youngest brother, but the related party transactions have not been disclosed. Another brother is a shareholder and executive in another undisclosed company, responsible for selling super micro computer's products.

Lastly, in terms of export controls, based on the analysis of 50,000 import and export transactions by institutions, it was found that the company's exports of high-tech products to Russia tripled after the Russia-Ukraine war, with at least 46 companies involved on US sanction lists. The company had previously stated that it would cease all sales to Russia.

In fact, super micro computer's own accounting history is not very clean.

• In 2018, the company was temporarily delisted by Nasdaq for failing to submit necessary financial reports on time.

• In 2020, NVIDIA was once again accused by the U.S. Securities and Exchange Commission (SEC) of widespread accounting irregularities, with a focus on a false increase of $0.2 billion in revenue, as well as underestimating expenses. Later, NVIDIA reached a settlement with SEC, paying a fine of $17.5 million to resolve the SEC's investigation into its accounting. As part of the settlement agreement, NVIDIA neither admitted nor denied the regulatory agency's accusations.

However, less than three months later, the company rehired several executives involved at the time.

Now, Super Micro Computer has experienced another "explosive disaster". In September this year, Super Micro Computer announced the postponement of its annual financial report, stating that internal evaluation of the financial report audit is underway.

Several industry insiders familiar with Super Micro Computer's financial performance told the Titanium Media App that the internal control issues at Super Micro Computer are very serious. The complex corporate relationships between many Liangjian brothers have raised doubts about the integrity of the management team of Super Micro Computer by the short-sellers. This undoubtedly increases the risk of holding this company, and EY's resignation intensifies this risk, implying that its financial issues may be very serious.

Hindenburg's founder Nathan Anderson commented: "In terms of auditor statements, Ernst & Young's resignation letter to Super Micro Computer is one of the strongest-worded I have ever seen."

Bloomberg industry research analyst Woo Jin Ho believes that this resignation may deepen people's doubts about the company's past financial condition. This "further demonstrates the necessity of strengthening corporate governance, which may require a change in leadership."

Super Micro Computer stated that although the company disagrees with EY's resignation decision, it has taken EY's concerns seriously internally. After the review is completed, the findings of the special committee and any remedial measures or other actions recommended by the special committee will be carefully considered.

Super Micro Computer supplemented on October 30th, stating that it will provide a business update for the first quarter of the 2025 fiscal year at 5:00 p.m. EST on November 5th, which is seen as an effort to alleviate investor concerns.

As of October 30, the wealth of the Liangjian brothers dropped to $1.8 billion, with a personal fortune plummeting by $4.7 billion (approximately 33.479 billion yuan) in the past 8 months.

Editor/Somer