Shares of Super Micro Computer Inc., better known as Supermicro, dropped more than 20% today after a short seller claimed to have found issues in its finances.

Hindenburg Research on Tuesday alleged that Supermicro’s earnings disclosures contain “glaring accounting red flags.” In a report, the investment firm claims to have found undisclosed related party transactions, an accounting term that covers deals between parties such as a company and its subsidiaries. Hindenburg says it also identified failures to comply with export controls and other issues.

In the wake of the investment firm’s claims, Supermicro issued a statement today saying it’s delaying the filing of its annual 10-K financial performance report. The company cited a need to review “internal controls over financial reporting.” Supermicro did not revise its earnings report for its fiscal fourth quarter and 2024 fiscal year, which was published earlier this month. 

Supermicro’s net sales more than doubled, to $5.31 billion, in the three months ended June 30. The revenue surge was driven in significant part by strong demand for the company’s artificial intelligence hardware, which also helped more than triple its stock price in the first half of the year. Supermicro sells AI-optimized servers that can be equipped with up to eight graphics cards and liquid cooling technology, which dissipates heat more efficiently than fans.

The San Jose, California-based company also makes a range of other data center systems. It provides so-called twin servers that combine two computers in a single chassis with shared cooling equipment and power supplies. Supermicro also makes blade servers, which are compact computers that can be integrated into a data center rack in large numbers, as well as flash storage appliances and other systems.

The rest of the company’s product portfolio comprises hardware building blocks that customers can use to build their own servers. Supermicro sells chassis frames that include all the auxiliary components necessary to build a server but don’t feature any computing hardware. The company supplies more specialized parts as well, including so-called coolant distribution units for circulating cooling liquid inside AI servers.

Supermicro is currently trading at about $436 per share, which is less than half the all-time high the stock reached in March. However, the company is still well above the $285 that its shares were worth the start of 2024.

The publication of Hindenburg Research’s report this week isn’t the first time Supermicro’s finances have come under scrutiny. In 2020, the company paid $17.5 million to end a probe by the U.S. Securities and Exchange Commission into its accounting practices. The SEC investigated whether Supermicro had recognized revenue earlier than permitted and understated expenses.

The strong demand for AI hardware that lifted Supermicro’s revenue and share price in the past year is expected to continue for the foreseeable future. Earlier this month, Supermicro projected that it would end the current quarter with net sales of between $6 billion and $7 billion. At the midpoint, that’s more than triple the company’s revenue in the year-ago quarter.

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