New
Why Super Micro Computer Stock Plummeted This Week
Super Micro Computer (NASDAQ: SMCI) stock lost ground over the last week of trading. The company's share price closed out Friday's session down 13.3% from the previous week's close, according to data from S&P Global Market Intelligence.
Supermicro's share price fell over the last week of trading as interest rate news from the Federal Reserve caused investors to shift their approach to stocks. While the Fed delivered the 25-basis-point interest rate cut that the market had anticipated, Chair Jerome Powell gave commentary that spooked investors.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
The Fed's rate outlook spurs sell-offs for Supermicro stock
The Fed held its latest meeting on Wednesday and delivered its third rate cut since September. The move lowered the benchmark interest rate to 4.25%, which is down from the recent high of 5.25% first established in July 2023. While higher interest rates are a way to combat inflation, they tend to produce weaker performance for the stock market.
Previously, the Fed had indicated that it expected to serve up four rate cuts of 25 basis points each next year. With its Wednesday meeting, the central banking authority said that it now expects to deliver only two cuts of that size in 2025. The change in outlook spurred a round of big sell-offs, and companies with growth-dependent and speculative outlooks saw outsized valuation pullbacks. Supermicro's share price had been down as much as 16.3% in the week's trading following the news, but it managed to see a bit of rebound recovery.
What's next for Supermicro?
On Friday, The Information published a report stating that the U.S. Department of Commerce had opened a probe into how Nvidia's advanced graphics processing units (GPUs) used for artificial intelligence (AI) applications had wound up in China. Due to rising tensions between the two countries, the U.S. has export bans that prevent advanced AI processors and semiconductor manufacturing equipment from being sold to China.
According to the report, Nvidia has asked major server companies including Super Micro Computer and Dell to look into potential pass-through sales that could have occurred from customers in Southeast Asia. The investigations could present yet another significant risk factor for Supermicro.
While nothing has been confirmed, there have been rumors and rumblings that China was gaining access to Nvidia's advanced processors by purchasing Supermicro's servers. Additionally, The Wall Street Journal reported in October that the U.S. Department of Justice had opened a probe into Supermicro. While most speculation suggested that the reported probe was centered around potential accounting irregularities at the company, some investors suggested that a breach of the export ban could also be playing a role.
Supermicro says that it will be filing its delayed 10-K report by Feb. 25, and the results will be under the microscope. If the company delivers a report that has no substantial restating of previously filed financial results, its share price could soar. On the other hand, the stock could plummet if the company's new financial auditor finds that previously reported results require significant downward revisions.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $349,279!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $48,196!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $490,243!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 16, 2024
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
