Super Micro Computer ETF Plunges as Company's Shares Fall

A flurry of bad news pushed the AI server maker down dramatically on Wednesday.

TwitterTwitterTwitter
sumit
|
Senior ETF Analyst
|
Reviewed by: etf.com Staff
,
Edited by: James Rubin

Talk about bad timing. 

Less than a week after the debut of the first single stock exchange-traded fund tied to Super Micro Computer, the company's stock plummeted by its largest amount in six years.

Shares of Super Micro Computer, which trade under the symbol SMCI, were down 27% midday Wednesday, their worst daily decline since Oct. 4, 2018, when the stock fell by 41%.

The Defiance Daily Target 2X Long SMCI ETF (SMCX), which debuted on Aug. 22, was down by twice as much, or 54% (SMCX was more recently off about 47%).

etf.com

Shares of Super Micro have been on a rollercoaster ride, rising from $284 per share at the start of the year to as much as $1,200 at their peak in March. They currently trade at around $400.

The company has benefited from the torrid demand for AI servers, which the company makes by packaging Nvidia chips with other components.  

Hindenburg’s Accusations 

On Tuesday, Hindenburg Research, a widely respected research outfit known for its bearish deep dives, released a scathing report accusing Super Micro of “accounting manipulation, sibling self-dealing, and sanctions evasion.”

The stock fell as much as 9% following the release of the report on Tuesday but finished the session down by less than 3%. 

The company didn’t respond directly to Hindenburg’s report but seemed shaken by the accusations because the next day, it announced that it would delay filing its annual report.

“Additional time is needed for SMCI’s management to complete its assessment of the design and operating effectiveness of its internal controls over financial reporting as of June 30, 2024,” the company said.

The delay raised fears that Hindenburg was right about Super Micro, a company that is no stranger to controversy and volatility in its stock.

Past Issues 

In August 2018, Super Micro was delisted from the Nasdaq for failing to file financial statements for two years.

In Oct. 2018, shares of the company fell by 41% in a single day after Bloomberg reported that the company sold malicious chips to its customers (the company said the report was false).

In 2020, the Securities and Exchange Commission charged Super Micro “with prematurely recognizing revenue and understating expenses over a period of at least three years.”

The company resolved the investigation by correcting its financial statements and paying a $17.5 million fine.

However, Hindenburg says that Super Micro hasn’t changed its ways and that the company has rehired all the executives involved in the accounting scandal. 

ETF Impact

While the aforementioned SMCX—which has only $1.5 million in assets under management— is affected the most of any ETF by troubles at Super Micro, the stock is tied closely to a few other ETFs. The $196 million YieldMax Ultra Option Income Strategy ETF (ULTY), for instance, has a 5% weighting in the stock. 

The $612 million iShares Future AI and Tech ETF (ARTY) and the $53 million iShares U.S. Digital Infrastructure and Real Estate ETF (IDGT) allocate 4.3% and 3% of their portfolios, respectively, to the stock.

There are currently 231 U.S.-listed ETFs that own positions in Super Micro, according to data from etf.com.

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.