AI server maker Super Micro Computer (SMCI) shares plunged 15% on Thursday after The Wall Street Journal reported that the company is under investigation by the U.S. Department of Justice.

Citing unnamed sources, the Journal said the Justice Department was investigating the company for possible accounting violations. The problem was first brought to light in August by short-selling firm Hindenburg Research in a report that accused Super Micro Computer of “glaring accounting red flags” as well as “undisclosed related party transactions” and “sanctions and export control failures.” ”

Super Micro declined to comment on the matter.

Super Micro makes AI server equipment that uses Nvidia’s GPUs, and Wall Street analysts believe the company is a key hardware supplier to Meta. Business boomed in early 2024 as the tech industry developed a range of AI software with increasing energy demands – and therefore demand for products like those from Supermicro. It’s one of the AI-driven stocks that have hit record highs, and despite Thursday’s decline, shares are still up 57% year-over-year.

Its gains earned the company a spot in the S&P 500 earlier this year. But the stock fell from highs above $1,200 in mid-March before it was added to the index. Shares fell in early August when the company missed Wall Street’s lofty expectations in its fiscal fourth-quarter earnings report, and again later in the month when the company delayed filing its annual 10-K report with the SEC.

Referring to the damning Hindenburg report and Super Micro’s late filing, CEO Charles Liang wrote in a letter to customers on September 3: “None of these events affect our products or our ability and capacity to deliver the innovative IT solutions that you rely on.” Our production capacity remains unaffected and continues to operate at pace to meet customer demand.

The company reported fourth-quarter earnings per share of $6.25 in August, below analysts’ expectations of $8.25. Revenue of $5.3 billion was just below Wall Street’s estimate of about $5.32 billion, but more than doubled from a year ago.

Liang said in his letter: “We do not expect any material changes in our financial results for the fourth quarter or fiscal year 2024.” Still, JPMorgan analyst Samik Chatterjee recently downgraded the stock to “Neutral” from “Overweight,” up from his 950 price target US dollars almost halved to 500 US dollars. Shares fell as low as $373 on Thursday before recovering to around $400 in the afternoon.

As of Thursday afternoon, nearly 37% of Wall Street analysts still recommend buying the stock, according to a Bloomberg consensus estimate. Analysts expect the stock to rise to $685 in the next 12 months.

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Laura Bratton is a reporter for Yahoo Finance.

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