Investing.com -- Super Micro Computer (NASDAQ:SMCI), a key player in the artificial intelligence server industry, is being probed by the U.S. Department of Justice (DoJ), according to a report by the Wall Street Journal (WSJ).
The investigation follows a report by activist short-selling firm Hindenburg Research, which raised concerns about accounting practices within the company, the WSJ said, citing people familiar with the matter.
The probe is said to be in its early stages, with a prosecutor from the U.S. attorney’s office in San Francisco reportedly seeking information related to the case, the WSJ said.
The inquiry appears connected to a whistleblower lawsuit filed in April by Bob Luong, a former employee, who accused Super Micro of accounting violations.
According to the WSJ, Luong's lawsuit alleges that the company improperly recognized revenue from 2020 to 2022, including booking sales that had not been completed and shipping incomplete equipment to customers.
Super Micro, known for making servers using Nvidia (NASDAQ:NVDA) chips for generative AI, saw its stock surge during the AI boom, but it has since plummeted after peaking at $66 billion in value earlier this year, the WSJ reported.
Following the WSJ report, SMCI shares are down around 12% on Thursday.
In its August report, Hindenburg also highlighted transactions between Super Micro and companies owned by CEO Charles Liang’s family, as well as allegations of shipments to Russian companies in violation of U.S. sanctions.
The day after the report, Super Micro announced it would delay filing its annual report and had formed a board committee to review internal controls.
In a letter to customers on September 3, Liang defended the company, calling the allegations in the short-seller report “false or inaccurate,” according to the WSJ. Meanwhile, Super Micro has requested that Luong’s lawsuit be moved to arbitration, with a court hearing scheduled soon.
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