Why Did SMCI Stock Fall 30% In August?

Super Micro Computer stock (NASDAQ:SMCI) has declined by nearly 29% over the past month, as investors reassess its position as one of the key AI plays. The company, which is seen as a key supplier of servers critical for deploying Nvidia’s latest GPU chips, has stumbled on two fronts. First, its Q4 2025 earnings missed expectations and highlighted ongoing margin pressures. Second, its most recent 10-K disclosed material weaknesses in financial reporting controls, prompting renewed concerns among investors about the company’s corporate governance.

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Tough Quarterly Report

SMCI built its growth story around a product roadmap closely aligned with Nvidia’s GPU cycle, often moving faster than peers to deliver server systems optimized for Nvidia’s latest chips through its modular designs, advanced cooling and power infrastructure, and close collaboration on software and hardware integration. However, the growth has slowed. Over Q4 2025 sales rose just 8% year-over-year to $5.8 billion, while earnings per share fell to $0.31 from $0.46 in Q4 2024. At the same time, competition from Dell, HPE, and Lenovo is intensifying, as these larger players bring broader portfolios, stronger supply chains, and global coverage that allow them to offer end-to-end hardware and software ecosystems. SMCI’s profitability has also deteriorated sharply, with gross margins sliding from 17% in Q4 FY’23 to 9.5% in Q4 FY’25. This was due to price cuts the company made to secure new design wins, and also due to costs tied to Nvidia’s platform transition from Hopper to Blackwell. With the server market becoming increasingly commoditized and rivals pushing aggressively on both price and performance, SMCI risks scaling a low-margin business that fails to deliver real shareholder value. (Why Are SMCI Margins So Low?)

Corporate Governance Concerns

Beyond weak earnings, SMCI’s credibility has also been undermined by governance issues. The company has a track record of overpromising and underdelivering. SMCI has slashed its full-year revenue guidance twice in consecutive quarters, lowering expectations from an initial 87% revenue growth for the year to just 49%. The large downward revision indicates that the company has not been able to accurately size up demand. The company has also fairly consistently missed consensus earnings estimates in recent quarters, suggesting its overall growth trajectory may have been overestimated. As we’ve noted in the past, investors must be cautious with investing in SMCI stock.

Super Micro has faced significant controversy over the past year, including allegations of accounting irregularities, delays in SEC filings, and scrutiny from short-sellers. These concerns are back in the spotlight as SMCI’s latest 10-K disclosed material weaknesses in financial reporting controls and acknowledged that remediation efforts may not fully resolve these gaps. Management warned that unresolved issues could impair the company’s ability to report results accurately and on time, while also driving higher compliance costs.

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