Super Micro (SMCI) TANKS 📉

Welcome to AI Collision 💥,

In today’s collision between AI and our world:

SMCI’s dumpster fire
Earnings creates opportunity
Alien Prime Time

If that’s enough to get the auditor resigning, read on…

AI Collision 💥

You know how a picture tells a thousand words?

Well…

That was trading in Super Micro Computer (NASDAQ:SMCI) on Wednesday.

And what could cause around $11 billion to get wiped off the market cap of Super Micro Computer in just one day? Not forgetting this has been one of the darlings of the AI stock boom in 2024…

Their accountants resigned.

Seems innocuous, right?

Not if those accountants are Ernst & Young, who audit the company’s financials, and they resigned because of,

…information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations.

Super Micro has been under the spotlight since late August after notorious short seller, Hindenburg Research published a scathing takedown of the company.

Now, Hindenburg can be hit and miss, and I’ve seen them rip a company apart, the stock price tanks benefiting their short position and they obviously make bank. Sometimes their reports can virtually end a company – Nikola one of their most substantial reports saw the stock price crater and never fully recover (there were also other factors in play). And sometimes their reports are short term opportunities that don’t negate the underlying strength of a company, Block Inc and DraftKings are two that come to mind.

But the Super Micro however has evolved into a full blown dumpster fire.

The core elements of the business are legit but clearly Hindenburg were onto something.

With EY now effectively saying they don’t want anything to do with this s***-show, it does appear some highly questionable activity has been going on behind closed door and underneath the noses of unsuspecting investors.

That said, my first instinct is to look at Super Micro and think, is this now a buying opportunity? But then the better part of me has to rationalise that no, not with this all going down, not yet at least.

When things like this happen to a company, you certainly don’t want to get caught up it in. It’s also not the absolute death-knell for a stock either. Also, before you even think about diving in, a lot more water needs to flow under the bridge before actually hitting the buy button.

We’ve covered Super Micro a few times at AI Collision and it seems every time we do, it’s amidst a healthy bout of volatility. Clearly that’s not dissipating any time soon. So if you think they can clear the decks, and right the wrongs, that’s fine, but you don’t need to rush any decisions on anything when things appear to be that worrisome.

I would say that more downside is likely to come before things get cleaned out, the record is set straight and the stock turns its nose up again. But when you’re looking at stocks on a pure risk return analysis, right now Super Micro looks about as risky as they come.

AI gone wild 🤪

It’s EARNINGS SEASON again so, in the esteemed words of Michael Buffer…

Tesla published earnings as we reported the other day and the stock screamed higher as the market revalued the company,

AMD reported earnings on Wednesday, showing growth…but not enough growth for “analysts” which meant AMD missed “expectations” and the stock tanked 10% in the session,

Then Microsoft dropped after hours because their cloud growth forecasts weren’t as high as expected,

Google was up 7% because their marketing pitch on AI played out pretty good saying their AI bets were paying off now,

And then fresh after hitting their all-time high stock price of $607.95, Meta was back down to $573 after Zuckerberg said he wasn’t going to slow down on the AI and AI infrastructure spend. In other words, he doubled down on his long term AI bets for the company.

And then (once again) as fears of overspending on AI ripped through earnings season, the entire “tech market” had a mild heart attack.

What are we to make of all this? Does any of this dissuade us from the belief that our future will revolve around the integration of AI in our world, our daily lives and every facet of society?

No, not one bit.

As we’ve said before, earnings season is typically a great chance to get some great stocks at great discounts when the market overreacts and forgets the long term view and direction of these companies and our world.

As more earnings get released in the coming days, remember that. Remember what your long term strategy is, and remember these wild volatility swings particularly in these AI-directed stocks typically are just short term noise (although sometimes there are exceptions as per the Super Micro debacle…)

Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

man in black suit jacket and black pants figurine

Boom 📈

DUOS Technology Group (NASDAQ:DUOT) up 14%
Brainchip (ASX:BRN) up 7%
Alphabet (NASDAQ:GOOG) up 5%

Bust 📉

Micron (NASDAQ:MU) down 7%
AMD (NASDAQ:AMD) down 7%
Nvidia (NASDAQ:NVDA) down 5%

From the hive mind 🧠

Here it comes, Apple’s long awaited shift into AI with their “Intelligence” offering. But just not for everyone. If you do get access though, I’d love to hear your thoughts when you get it.
First it was threats of intelligence as an existential threat. Then of draining all our power. Now it’s going to cover the world in electronic waste.
This just quietly dropped into the wild yesterday. Is this the beginning of the end for Google? Is the way in which we “search” about to change forever. Instead of “Googling” something will we now “GPT” it?

Artificial Polltelligence 🗳️

Apologies that I can’t currently view the results from our poll on Tuesday as the backend of our website has proverbially shat itself so I can’t see what you voted for…when I can I’ll take a look at whether you think the US fares different to the UK in the near future on the issue of an incoming Age of Abundance vs Age of Austerity.

But now onto a new question…

Weirdest AI image of the day

Netflix is reportedly working on an ALIEN sitcom directed by Ridley Scott – r/weirddalle

ChatGPT’s random quote of the day

“The best way to get a good idea is to have a lot of ideas.”
— Linus Pauling

Thanks for reading, and don’t forget to leave comments and questions below,