If you thought semiconductors were already having a rough week after AMD's meh results, well, then I’d suggest buckling up butter cups. Why? Well as detailed in yesterday's issue of The Final Tally, Super Micro Computer ($SMCI) just took the chaos up a notch, announcing that Ernst & Young (EY) resigned as their auditor—and sweet baby Jesus, it's exactly the spectacular sh*tstorm you'd expect.

(Source: Giphy) 

In short, right before the market opened, SMCI dropped the bomb that EY had officially resigned as their auditor, citing "significant concerns" over the company's internal controls, board independence, and accounting practices within a memo to the board.

(SEC.Gov) 

Meaning, in a resignation letter that screams “tell me you’re guilty without telling me you’re guilty” EY basically told Super Micro they were "unwilling to be associated" with their financial statements LOL. 

(Source: Yahoo Finance) 

Now ICYMI, this isn’t exactly a bolt from the blue. EY had been raising red flags since July, when they first flagged issues with Super Micro’s governance and transparency. They even hinted that the board’s "independence" from CEO Charles Liang was questionable at best.

Then in what seemed like a weirdly satisfying but God awful sequence of events for Super Micro, Hindenburg Research dropped a short seller report accusing the company of *checks notes* shady accounting and governance issues. Add to that a delayed 2024 financial statement filing and whispers of a federal investigation, and bam… Enron suddenly sounds less horrific.

What’s more is that Super Micro’s official response was to disagree with EY (naturally) - while calling in the big guns in the form of Cooley Law and an additional forensic accounting firm to pick up the slack. Spoiler alert: The fact that they're even still "reviewing" probably means it's worse than my mothers disappointment in my life choices.

So as expected, with no answers in sight, the carnage yeeted shares -33%, adding to the nearly 75% slide since its all-time high in March. For instance our boys over at Stocktwits are saying $SMCI’s sentiment is in the toilet with "extremely bearish" vibes all around. Translation: No “BTFD” cue on this one friends. 

Which means it’s more than crystal clear that Super Micros is definitely not taking home the gold in 2024. But when it comes to Dell? Well, they’re collectively losing their minds at HQ. 

You see, with Super Micro getting the cold shoulder on pretty much every corner of Wall Street with analysts like Needham and Mizuho reiterating their neutral stance (while CFRA Research analyst Shreya Gheewala slashed her price target from $43 to $31) - the writing is on the wall that Dell is officially QB1 to scoop up some of $SMCI’s AI server market share. 

(Source: Reddit)

The result? Dell jumped 6.4% yesterday on the news of Super Micro’s fallout. In the end, yes Super Micro’s in a world of hurt. Between the auditor resignation, a potential federal investigation, and stock plunges, things aren’t looking up anytime soon. 

(Source: IBD) 

So if you’re a degenerate Wall Street Bets type that gets their fix on catching falling knives, I’d still think twice on this one - or atleast wait until that forensic accounting review wraps up. For now, all I’m seeing is a major hard pass from investors. 

In the meantime though, do what you will with this information and as always - stay safe and stay frosty, friends! Until next time… 

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Stocks.News does not hold positions in companies mentioned in the article.