US Justice Department investigating Super Micro Computer, WSJ reports

(Reuters) – The U.S. Justice Department is investigating Super Micro Computer (SMCI), the Wall Street Journal reported on Thursday, nearly a month after short-seller Hindenburg Research alleged “accounting manipulation” at the artificial intelligence server maker.

Super Micro shares fell about 12% following the report.

The WSJ report, which cited people familiar with the matter, said the investigation was in an early stage and that a prosecutor from the U.S. attorney’s office recently contacted people who might have relevant information.

The prosecutor has requested information that appears to be related to a former employee who accused the company of accounting violations, the report added.

Super Micro had delayed filing its annual report last month, citing the need to assess “its internal controls over financial reporting,” a day after Hindenburg disclosed a short position and made allegations of “accounting manipulation.”

The short seller had cited a three-month investigation that included interviews with former senior Super Micro employees and litigation records.

Hindenburg’s allegations included evidence of undisclosed related-party transactions and failure to comply with export controls, among other matters.

The company had denied Hindenburg’s claims.

Super Micro and the Justice Department did not immediately respond to Reuters’ requests for comment on Thursday.

A review of tender documents by Reuters earlier this year showed Chinese entities procured high-end Nvidia chips embedded in server products made by several companies, including Super Micro, through resellers.

The US government has been cracking down on the sale of such technology to China.

Super Micro has been a big winner in the generative AI boom as companies bet on the technology needed to power applications like ChatGPT, pushing its market value to $67 billion in March from about $4.4 billion.

Since then, the rally in AI stocks has cooled as investors realized that the payoff for the companies’ heavy investments would be slower than expected.

(Reporting by Akash Sriram and Aditya Soni in Bengaluru; editing by Shreya Biswas)