Key Points
Bluefin Research reports Oracle is canceling a big order for Super Micro servers.
xAI may also be dragging its feet on an order for servers with older Nvidia chips.
Super Micro Computer(NASDAQ: SMCI) stock sank 7.6% through 10:30 a.m. after news broke this morning of a falling-out the company may be having with key customer Oracle(NYSE: ORCL).
According to technology-focused equity research house Bluefin Research, Oracle has just canceled an order for 300 to 400 Super Micro GB300 NVL72 server racks loaded with Nvidia(NASDAQ: NVDA) chips.
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Super Micro's dilemma(s)
Pundits suggest Oracle canceled the contract to distance itself from accusations that Super Micro co-founder Yih-Shyan "Wally" Liaw made illicit sales of Nvidia chips to China. If true, then the fact that Super Micro is losing one contract should come as no surprise -- and other contract losses may ensue.
In fact, in what may be an unrelated story, Bluefin notes Super Micro is also losing sales to xAI ahead of the SpaceX IPO. (And SpaceX now owns xAI.)
Is the China scandal the culprit here as well? Perhaps, but the more likely reason, says Bluefin, is that SpaceX is refusing older B200 GPU chips that Super Micro has been trying to unload, preferring to buy faster GB200 NVL72 servers from Dell(NYSE: DELL) and Hewlett Packard Enterprise(NYSE: HPE).
This, too, could prove troublesome for Super Micro, if it ends up stuck with old and obsolete AI chip inventory that it can only sell at a loss -- or not sell at all.
Is the risk priced in?
But here's the good news for Super Micro investors: After falling 18.5% in price over the past year, Super Micro no longer looks terribly expensive, costing only 21 times trailing earnings. And despite its issues, analysts still expect Super Micro to grow its earnings 26% per year over the next five years.
An AI stock with a PEG ratio of less than 1.0? Sounds intriguing.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hewlett Packard Enterprise, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
