Shares of Super Micro Computer slipped again Tuesday ending a rally that appeared to signal a recovery from recent setbacks. SMCI stock rose sharply Monday extending a strong run for last week, but the shares turned red again on Tuesday, shedding 10.4% to close at 34.43.
The rally had prompted one industry analyst to declare that the data center technology powerhouse had bounced back.
"I think they're back," Ray Wang, founder and principal analyst at Constellation Research, told Investor's Business Daily on Monday. But SMCI stock, which reclaimed its 50-day average Monday, tumbled again, edging down toward its 21-day line. The stock's Relative Strength rating, which was at 91 just three months ago, has fallen sharply to 9. The stock is also below its declining 200-day moving average, another factor which makes it off limits for IBD-style investors.
SMCI Stock: Investors Get Spooked
Supermicro stock started crashing over the past months on a series of news events that spooked the data center technology company's investors.
The shares fell sharply in late August after the company announced that it was delaying the filing of its annual report following a prominent short-seller's allegations accusing SMCI of accounting irregularities.
Then SMCI stock plummeted in late October when the company disclosed that its accounting firm had resigned. The company then reeled from speculation that it might be delisted from the Nasdaq.
After that, things started looking up.
The stock rallied in mid-November after Supermicro filed a plan to avoid being delisted. The stock has been climbing since then, posting gains in six of the last seven trading days.
'They've Been So Battered Down'
"They've been so battered down," Wang told IBD. "I think the accounting issues are resolved so people are less worried."
The accounting worries hit what has been one of the highflier in the AI craze. Supermicro quickly emerged as one of the main beneficiaries of the AI juggernaut, together with companies like Nvidia, Microsoft and Google.
"If you're just trying to figure out derivatives on AI and Nvidia growth, Supermicro is going to be one of the winners," Wang said. "If you're a portfolio manager and you're looking at AI stocks to go after, you're going to want to look at Supermicro."
But Tuesday's stock losses underscored Wall Street's lingering doubts about Supermicro.
The company's woes appeared to benefit another AI player, Dell. Dell stock rallied during times when bad news hit SMCI.
"Make no mistake, Super Micro isn't just Dell's competitor — it's "the" competitor for AI servers, Melius Research analyst Ben Reitzes told clients in a Nov. 4 note. "Boy was it one of the big winners" when Super Micro's auditor resigned he said.
The impact of Supermicro's recent problems on Dell should become clearer Tuesday when the tech giant reports quarterly results.
