(Bloomberg) — What was one among Wall Street’s hottest artificial intelligence plays has been pummeled by bad news, with dip buyers staying away as accounting questions hang over the stock.

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Super Micro Computer Inc. shares are on pace for his or her worst month in nearly six years after allegations of accounting problems by a short-seller and a delayed 10-K filing for which the corporate said it needed more time to evaluate its internal controls. A disappointing earnings report earlier in August also roiled the stock.

It’s a sudden turnaround for a key beneficiary of spending on AI infrastructure. Added to the S&P 500 Index in March, Super Micro shares have since dropped 64% below a peak hit that month. The stock is down as much as 36% this week, including Friday’s drop of as much as 6.5%.

Hindenburg Research on Tuesday said it is brief the corporate, as an investigation revealed “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” On Wednesday, the firm said it would delay filing its annual financial disclosures.

A spokesperson for Super Micro declined to comment on the Hindenburg report. Reached for a comment concerning the filing delay, the spokesperson said that “additional time is required to evaluate some internal controls,” and that the corporate hasn’t updated the announced financial results for its most up-to-date fiscal yr and quarter.

“The ten-K delay is just adding to the uncertainty, even when AI servers remain an incredible business,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services. “I can see the stock going significantly lower from here.”

Other analysts are souring on the stock. Bank of America on Thursday moved its rating to under review, writing that “the delay in filing and any potential findings from the review results in more uncertainty, and leaves us unable to evaluate the basics of the corporate.”

That followed CFRA, which downgraded Super Micro after Hindenburg’s report. “While we consider the evidence presented doesn’t conclusively show significant accounting malpractice or verifiable sanction evasions, SMCI’s delayed 10-K filing and potential reputational damage raises concerns,” it wrote.

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Few are enticed by a valuation that has plummeted to levels that could possibly be attractive under other circumstances. Shares trade below 12 times estimated earnings, a fraction of a recent peak near 40, and a reduction to its 10-year average.

When it comes to estimated revenue, Super Micro trades at 0.9 times, making it the third-cheapest stock within the Nasdaq 100 Index by this metric. Two of the most costly, in contrast, are also connected to AI: Nvidia Corp. trades at 19 times estimated revenue and Arm Holdings Plc tops the list at greater than 30 times.

Kaufman said the delayed filing exacerbated his broader concerns about how long spending on AI infrastructure will proceed to grow at elevated rates. This issue contributed to a 6.4% drop in Nvidia Corp. on Thursday, after the AI-focused chipmaker gave a forecast that didn’t live as much as essentially the most optimistic hopes.

This will not be the primary time Super Micro has faced questions over its accounting. In 2020, the corporate resolved an investigation by the US Securities and Exchange Commission into its accounting and disclosures for its fiscal years 2014-2017 by correcting its financial statements and paying a penalty, while promising to not commit such violations in future.

For a lot of, that episode was forgotten as AI took Wall Street by storm. Super Micro sells high-powered servers for data centers, and it has seen an explosion in each sales and investor interest. Revenue growth topped 140% in its most up-to-date quarter, when it also gave a sales forecast that was much stronger than expected. Revenue is seen tripling this quarter, in accordance with data compiled by Bloomberg.

The stock, which soared nearly 250% in 2023, continues to have some defenders. Rosenblatt Securities wrote that “a 10-K delay will not be a great look, obviously,” but that “the business stays strong and healthy, and there have been no changes to the corporate’s financial results.” The selloff, analyst Hans Mosesmann added, “seems excessive.”

After all, investors who want exposure to AI servers produce other options, including Dell Technologies Inc., which on Thursday reported better-than-expected revenue on the back of AI server growth. Dell gained 3.4% on Friday.

While there’s a probability this might become a buying opportunity for investors, “that’s still an unknown, and there’s no reason to take that risk when Dell also looks low cost, can also be well positioned in servers, and doesn’t have these red flags,” said Adam Sarhan, chief executive officer at 50 Park Investments. “It is going to take time for Super Micro to earn back confidence, and while you possibly can jump in now, it could really be swim at your personal risk.”

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A pair of e-commerce firms have seen divergent fortunes this yr, with eBay rising 34% in 2024 as of its last close while Etsy has dropped 32%. An exchange-traded fund that tracks online retail is up lower than 4%. Online auction company eBay has been supported by better-than-expected earnings, and Bloomberg Intelligence on Thursday wrote that it sees potential for growth in gross merchandise volume and buyer retention. In contrast, Etsy’s most up-to-date report was greeted with caution.

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Earnings Due Friday

–With assistance from Jeran Wittenstein.

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