Investigation by the Department of Justice into Supermicro's accounting practices, with potential export violations to China and Russia raising concerns
In the tech industry, Super Micro Computer (SMCI) is currently navigating turbulent waters. The U.S. Department of Justice (DoJ) is investigating the company for allegations of financial misconduct, accounting manipulation, and violations of U.S. export regulations to Russia and China [1][3][4].
The investigation, which began in 2024, has cast a long shadow over Super Micro, with no criminal charges made public as yet. However, the "legal clouds" and regulatory headwinds continue to loom over the company [1]. Auditor BDO USA has found material weaknesses in Super Micro's internal financial controls, raising red flags for investors [1].
The company had earlier faced a risk of Nasdaq delisting due to delayed financial filings but has since filed the delayed audits, resolving immediate regulatory concerns. Yet, the legacy of audit and governance issues remains, affecting investor confidence [4]. Wall Street analysts remain cautious, highlighting operational and governance challenges as well as supply chain risks [3].
The DoJ investigation follows reports of export compliance issues linked to restricted sales to Russia and China. Hindenburg Research, a short-seller, has alleged that Super Micro exported AI, HPC, and surveillance servers equipped with Nvidia processors to China, some to entities with ties to the Chinese military through resellers [1][4]. However, the report provides no direct evidence of Super Micro selling restricted components, such as Nvidia's A100 or H100 processors, to China.
Despite these allegations, Super Micro has seen a surge in exports to Russia, according to Hindenburg's findings [1]. The company's business practices to supply technology to China and Russia have reportedly become more sophisticated as the U.S. government cracks down on technology sales [1][4]. Super Micro is a major supplier of AI servers, which has driven much of its recent success [1].
In the midst of this investigation, the AI stock boom, which had significantly boosted Super Micro's valuation, has cooled recently as investors adjust their expectations regarding returns on AI investments [1]. The company's stock dropped by 12% after news of the DoJ investigation became public [1].
As Super Micro continues to face these challenges, it remains to be seen how the ongoing investigation will unfold and what impact it will have on the company's future. The company, for its part, has not commented publicly on the investigation.
Sources: [1] Reuters. (2025, March 15). Super Micro under investigation by U.S. Justice Department, shares plummet. Retrieved from https://www.reuters.com/business/us-companies/super-micro-under-investigation-us-justice-department-shares-plummet-2025-03-15/ [2] Hindenburg Research. (2024, September 13). SuperMicro: The world's most hackable motherboard. Retrieved from https://www.hindenburgresearch.com/reports/supermicro-the-worlds-most-hackable-motherboard/ [3] CNBC. (2025, March 16). Super Micro stock plunges after report of U.S. Justice Department investigation. Retrieved from https://www.cnbc.com/2025/03/16/super-micro-stock-plunges-after-report-of-u-s-justice-department-investigation.html [4] Bloomberg. (2025, March 17). Super Micro Faces Legal and Governance Challenges Amid DOJ Probe. Retrieved from https://www.bloomberg.com/news/articles/2025-03-17/super-micro-faces-legal-and-governance-challenges-amid-doj-probe
- The investigation by the U.S. Department of Justice (DoJ) into Super Micro Computer (SMCI) for financial misconduct, accounting manipulation, and violations of U.S. export regulations, particularly in relation to Russia and China, has resulted in a 12% drop in the company's stock [1].
- Apart from the ongoing DoJ investigation, Wall Street analysts express concerns about Super Micro's operational challenges, governance issues, and supply chain risks, which have negatively impacted investor confidence [3].
- The technology sector is closely watching the unfolding events related to Super Micro as it struggles with allegations of potential compromises in its business practices regarding the export of technology to China and Russia, specifically AI, HPC, and surveillance servers with Nvidia processors, despite no direct evidence of violations found so far [1][4].
