Why SMCI Stock Can’t Catch a Break: Smuggling Charges, Short Sellers, and a $13 Billion Question

The figures ought to be illogical. Super Micro Computer recorded revenue of $12.68 billion in its most recent fiscal quarter, a 123 percent increase over the previous year. Its earnings per share of $0.69 exceeded analyst projections by over 40%. By every quantifiable measure, demand for its AI servers is still very high. However, the stock is currently trading close to the bottom of its annual range at about $22, down about 65% from its 52-week high of $62.36. Its market capitalization has decreased to about $13 billion for a company that generates almost $22 billion in revenue annually. In this story, something has gone terribly wrong.

You have to go back a few months and then a few years to comprehend what. The San Jose company, known as Supermicro, established its reputation by producing the servers that cloud providers and data centers use to handle the hardware-intensive workloads that artificial intelligence requires. Practically speaking, it is one of the businesses that physically enables the AI boom. Its machines are filled with Nvidia GPUs, put together in its San Jose facilities off North First Street, and delivered to clients who are investing billions in AI infrastructure. Supermicro was among the most immediate beneficiaries of the sharp acceleration of the AI buildout in 2023 and 2024. As a result, the stock experienced a brief period of remarkable Wall Street visibility, rising from single digits to a peak above $100 in early 2024.

The accounting questions then began.

In a more subdued manner, Supermicro had previously been in this situation; in 2020, the SEC fined the company for financial reporting problems that had existed for a number of years. The stock collapsed in 2024 when a short-seller report brought up new concerns about its internal controls and accounting procedures. The business postponed filing its annual report. The auditor quit. Nasdaq delisting posed a threat. The company eventually made a comeback toward respectability after hiring a new auditor and restating and submitting the filings. For a while, investors who made purchases during that period of extreme fear saw considerable success. However, the harm to credibility persisted, and it takes a while to restore the level of institutional trust that had been damaged.

The next chapter is about to begin, and it’s darker. A co-founder of the company and two associates were charged with crimes on March 20, 2026, for allegedly smuggling Nvidia-powered servers into China, which may have violated U.S. export control laws. A few days later, a class action lawsuit was filed by shareholders alleging securities fraud and Supermicro’s alleged undisclosed reliance on sales in China, which may have violated federal regulations. These are serious problems with governance. Regardless of how the revenue chart appears, these are the kinds of legal developments that prompt compliance officers at major institutional investors to hit the sell button right away.

A tale of its own can be found in the institutional activity surrounding the stock in recent months. In Q4 2025, UBS sold off 74% of its SMCI holdings. JPMorgan reduced its stake by over 81%. D.E. Shaw cut its investment by almost the same amount. The sophisticated London-based hedge fund Marshall Wace, which is not known for panicking, sold 98.4% of its stake. These are not actions taken by businesses that are merely worried. They serve as exits. At the same time, Canada’s Pension Plan Investment Board expanded its position by over 344 percent, and Citadel increased its share by 57.6 percent. Goldman Sachs has a Sell rating on the stock after making large additions in Q3. It almost seems as though two entirely different organizations are evaluating two entirely different businesses due to the stark difference in viewpoints.

Observing all of this makes it difficult to ignore the fact that the underlying business is now essentially incidental to the behavior of the stock. The increase in revenue is genuine. There is a genuine need for AI servers. Rosenblatt maintains its Buy rating despite lowering its price target to $32, arguing that the order backlog and technology are strong enough to make a comeback after the legal fog clears. There is a logic to that argument. However, in a case involving a criminal indictment and an SEC investigation that already has institutional investors fleeing, “once the legal fog clears” is doing a lot of heavy lifting.

Currently, analyst targets range from $22 to $34, with a median of roughly $31 to $32. This suggests significant upside from the current price if you think the legal issues will be resolved without jeopardizing the company’s relationships with suppliers and customers. Contrary to that optimism, Bank of America, which has a Sell rating, cautions that suppliers and customers may retreat as regulatory scrutiny increases. The worry is not unfounded. If a business that makes significant money from partnerships involving Nvidia hardware is discovered to have assisted in the evasion of export regulations, it faces risks that no quarterly earnings increase can completely mitigate.

With high implied volatility and a tendency toward bullish calls ahead of the upcoming May earnings report, the options market indicates that traders are placing bets on the stock’s potential to rise. That could very well occur. Supermicro has previously shocked markets in both directions, and there will always be a basic need for the products it produces. However, servers, revenue, or spending on AI infrastructure aren’t the main concerns surrounding SMCI stock at the moment. No matter how big the order backlog gets, the question is whether a business that is constantly at the center of governance disputes can ever completely shake the shadow they cast.