After riding a rollercoaster in 2024, Super Micro just suffered another setback.
The Chinese AI company DeepSeek just topped Apple’s U.S. App Store download charts. DeepSeek’s parent claims that its flagship AI model, R1, performs similarly to costly models like OpenAI with fewer resources.
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And the DeepSeek model is open-source, enabling developers worldwide to modify it.
This has hurt major AI players led by chipmaker Nvidia (NVDA) , which tumbled nearly 17% on Jan. 27. Super Micro Computer (SMCI) , a close partner of Nvidia, dropped 12.6%.
Charles Liang, CEO of Super Micro, at a keynote during Computex 2023. Super Micro shares now are down roughly 75% from their peak in March 2024.
What happened to Super Micro in 2024?
Super Micro specializes in high-performance server hardware. The company integrates Nvidia’s graphics-processing units into its servers, which are then supplied to clients like cloud service providers.
Almost a year ago, Super Micro was riding high. The company saw its stock peak in March 2024 as a darling in the AI and data center boom.
Related: Top analyst revisits Nvidia stock price target amid DeepSeek threat
Things were going so well that the company declared a stock split to make its shares more accessible to investors.
The trouble began, however, in late summer. On Aug. 27, short-seller Hindenburg Research released a report accusing Super Micro of what it called “glaring accounting red flags, evidence of undisclosed related-party transactions, sanctions violations, and customer troubles.”
A day later, Super Micro said it would delay filing its Securities and Exchange Commission Form 10-K for the fiscal year ended June 30, fueling investors’ concern.
Super Micro’s then-auditor, Ernst & Young, resigned in October, citing governance and transparency concerns.
Super Micro appointed a special committee of the board and said it found “no evidence of misconduct” after investigation.
In December, Super Micro was dropped from the Nasdaq 100 index and replaced by Palantir Technologies.
Analysts remain bullish on AI stocks
Market jitters over AI-related stocks have intensified as the Nasdaq Composite shed 3% on Monday, but some analysts say the move might be overdone.
“We like to take advantage of opportunities when they present themselves, and as we continue to read and have conversations about DeepSeek, it is increasingly evident the market is overreacting,” wrote long-time fund manager Chris Versace on TheStreet Pro. “Part of this stems from DeepSeek previewing its AI model in November of last year, which means it was already a known entity in AI circles last week when Stargate AI was announced, and Meta telegraphed its sizable capital spending increase for this year. That, along with concerns over data privacy, security and other factors tied to DeepSeek suggests the market is overreacting to today’s headlines.”
Related: Analyst revisits Meta stock price target as Zuckerberg drops bombshell
Several analysts have defended those AI stocks. Investment firm Wedbush views the selloff as a “golden buying opportunity.”
“There is only one chip company in the world launching autonomous, robotics, and broader AI use cases, and that is Nvidia,” said Wedbush analyst Daniel Ives.
“Nothing with DeepSeek makes us believe anything different,” he said.
Bernstein reiterated outperform ratings on Nvidia, with a $175 price target, and Broadcom (AVGO) , with a $220 target, saying it continues to like those names in particular within the U.S. semiconductor sector.
Where Super Micro is concerned, Loop Capital raised its price target last week to $40 from $35 with a buy rating, thefly.com reported on Jan. 23.
The firm sees Super Micro as an “important company in an important space,” citing unique growth opportunities and strong business fundamentals. The analyst expects the GB200 and GB300 product lines to gain momentum by summer as major customers ramp up their activity.
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However, Loop added that Super Micro could experience a clunky first half of 2025, at least until May or June, when key Tier 2 customers begin getting GB200 allocations.
Super Micro shares closed at $29.10 on Jan. 27. The stock gained 7.23% in 2024 and is now down roughly 75% from its peak in March 2024.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
