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Short Report

Why Hindenburg Research is betting against AI stock market darling Super Micro

The short selling firm alleges accounting irregularities, questionable governance, and even sanctions evasion.

8/27/24 10:54AM

An AI stock market darling is the newest target of Hindenburg Research.

Super Micro Computer was down as much as 8.7% in early trading on Tuesday before paring about half of those losses by 10am ET after the short-selling firm released a report detailing why it’s betting against the stock.

Demand for SMCI’s severs has skyrocketed amid the AI boom, but Hindenburg says underneath that lies a company with a dodgy accounting history, questionable business ties, and even sanctions evasion.

It’s another question mark that threatens to upend what’s been largely an AI-dominated stock market rally in 2024, which faces a big test with Nvidia reporting earnings on Wednesday.

Heading into Tuesday’s session, Super Micro Computer was the third-best performing stock in the S&P 500 this year, with its 98% gain trailing only Nvidia and Vistra. The bloom is already arguably off the rose, however: shares of the company had risen more than 300% in less than three months to start 2024.

The entire report is worth a read. But we’ve picked out some of the most striking claims made by Hindenburg below.

Potential accounting irregularities?

In 2018, Super Micro was temporarily delisted from Nasdaq for failing to file financial statements. By August 2020, the company was charged by the SEC for “widespread accounting violations,” mainly related to $200+ million in improperly recognized revenue and understated expenses, resulting in artificially elevated sales, earnings and profit margins…
Three senior employees who left in early 2018 amidst the accounting scandal were rehired, individually serving as (1) a member of the board of directors (2) a consultant serving close to the CEO (3) and a VP of business development.

Keeping it in the family?

Beyond fresh questions around its revenue accounting, we found that Super Micro’s relationships with both disclosed and undisclosed related parties serve as fertile ground for dubious accounting.
For example, disclosed related party suppliers Ablecom and Compuware, controlled by Super Micro CEO Charles Liang’s brothers, have been paid $983 million in the last 3 years. Ablecom is also partly owned by Super Micro CEO Charles Liang and his wife…
Super Micro has claimed its liquid cooling technology will “revolutionize the industry” and is its “competitive edge.” But at a recent industry conference, Super Micro featured related party Ablecom’s liquid cooling solutions, per an Ablecom engineer.
Ablecom has several patents for its liquid cooling technology. Despite this, Super Micro has never disclosed any related party involvement in its liquid cooling technology.

Behind enemy lines?

When Russia invaded Ukraine in February 2022, the U.S. government imposed stringent restrictions and bans on exports to Russia of high-performance computers and components…
Exports of Super Micro’s high-tech components to Russia have spiked ~3x since the invasion of Ukraine, apparently violating U.S. export bans, according to our review of more than 45,000 import/export transactions.
At least 46 companies that handled Super Micro products to Russia since the invasion are now under OFAC sanctions or on U.S. government watchlists.

In addition, the firm flagged perceived quality shortcomings that they say has caused the likes of Nvidia, Tesla, Amazon to turn away from Super Micro’s products.

Per exchange data, short interest as a percent of shares outstanding has jumped from below 6% in mid-April to above 15% by mid-August, with the bulk of that increase in bearish bets coming over the past month.

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The Future of the AI boom is coming into view

GE Vernova and Vertiv are giving us a glimpse into the future of the AI boom

GEV’s backlogs are bursting at the seams. One analyst told us he thinks that by the end of this year, GEV could be completely sold out of production capacity for heavy-duty turbines until 2029 or 2030.

Matt Phillips8m

Max Knoblauch10m

Low-cost airlines plunge on report Trump administration is close to $500 million rescue deal for Spirit

Low-budget US airlines are sinking on Wednesday morning following a Wall Street Journal report that the Trump administration is close to making a rescue deal for Spirit Airlines, which is said to be nearing liquidation amid high fuel costs.

Shares of Frontier, Allegiant, JetBlue, and Southwest Airlines all dropped notably.

Per the WSJ, the US government could soon loan Spirit up to $500 million in return for warrants to take a sizable stake in the airline, which has filed for bankruptcy twice since late 2024. The carrier has made efforts to emerge from its latest bankruptcy, filed in August, but fuel costs amid the war in Iran have upset the math.

On Tuesday, President Trump told CNBC he would “love somebody to buy Spirit.”

Exclusive | Trump Administration Nearing Rescue Deal for Spirit Airlines

On Tuesday, President Trump told CNBC he would “love somebody to buy Spirit.”

Max Knoblauch4h

Boeing reports better-than-expected Q1 earnings, revenue

Plane maker Boeing reported its first-quarter earnings before the market opened on Wednesday. Its shares climbed more than 3% in premarket trading.

For Q1, Boeing reported:

An adjusted loss of $0.20 per share, compared to the loss of $0.68 per share expected by Wall Street analysts polled by FactSet.
Revenue of $22.22 billion, compared to estimates of $21.85 billion.

Boeing reported -$1.45 billion in free cash flow in Q1, compared to the -$2.34 billion expected by Wall Street. Prior to Wednesday, Boeing had reported two consecutive quarters of positive FCF following six straight quarters of negative results. The company is still guiding for full-year FCF of between $1 billion and $3 billion.

Earlier this month, Boeing announced it had delivered 143 commercial jets in Q1, up 10% from the same period last year and ahead of rival Airbus, which delivered 114. This was Boeing’s first time outdelivering Airbus since 2018.

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GE Vernova, top AI energy play, rises after Q1 report

GE Vernova, a maker of power plant equipment that’s seen orders tied to data centers surge, rose early Wednesday after posting strong Q1 results and lifting full-year sales guidance. The GE spin-off reported:

Adjusted EBITDA of $896 million vs. the $772 million estimate from analysts polled by FactSet.
Total revenue of $9.34 billion vs. the $9.25 billion consensus expectation from analysts polled by FactSet.
Full-year 2026 sales guidance that was lifted to between $44.5 billion and $45.5 billion from prior guidance of between $44 billion and $45 billion, vs. the consensus estimate of $44.64 billion.

“In the quarter, our electrification segment booked $2.4 billion in equipment orders to support data centers, more than all of last year,” said CEO Scott Strazik.

GE Vernova is up some 600% over the last two years through Tuesday’s close, but the majority of those gains were booked by August 2025. After being largely range-bound for months, the stock busted out following the company’s last earnings report, lifting the shares up nearly 50% in 2026.