SMCI **PLUMMETS** AI Fraud???

just a heads up this might end up

bouncing up after this big hit over the

next few weeks but so far there's a

chance especially with these borderline

fraudulent activities going on this

company could end up going bankrupt now

we'll talk about what just happened but

some people are trying to make a play

that Dell is going to pick up on these

in my opinion profitless server rack

installs but just keep in mind the

refresh cycle for Server rack

once we build out AI server Rex how many

more server Rex do we all just saying

just saying let's get into what just

happened with super micro we got to talk

about what's going on at Super Micro

computer because this stock is now down

32 to 33% here in the premarket take a

look what they just filed they just

filed this 8K uh and if we scroll down

to it take a look at this uh what is

this it's about five six days ago here

uh eron young this is this is an auditor

this is a big deal sent the members of

the audit committee a letter of

resignation okay that's bad that's not

good at all so first of all an audit

committee understand what that means for

a moment when a company is public you

generally have a board of directors and

uh they elect uh you know or appoint a

CEO and the executive staff the board of

directors works for the shareholders the

owner of the company uh well uh the

company's got to go operate the board

represents the shareholder interests and

then they'll actually create usually an

independent audit committee that's

separate from these individuals and when

an auditor has questions about the

company rather than the auditor talking

to the CEO or talking to the board they

talk to the audit committee uh so just

so you know what an audit committee is

an audit committee is at the actual

company

and apparently this uh this auditor

which I'm pretty sure they were just

retained quit which is crazy because

like it I don't know things got to be

bad for an auditor to quit uh the

company has begun the process of

identifying a successor uh for a

registered public accounting firm the

company will authorize eron young to

respond fully to inquiries uh of the

successor once selected the company does

not currently expect that the resolution

of any matters raised by erst Young uh

or considered by the special committee

is noted below as noted below okay I

want to see this will result in any

restatements so uh it doesn't they're

basically saying hey we we don't think

uh we don't think any prior financials

are bad this is what they're saying uh

although obviously uh ernston young

could be uh of a different mindset there

right uh so this is a keep in mind

that's a statement from this company I'd

like to change the color of that text

but uh this is uh Adobe just being trash

as usual oh my gosh this freaking

software is just complete

trash okay we'll keep going here doesn't

even let me highlight right now there we

go all right so can I change the color

now nope still can't all right whatever

ER young was engaged okay so they were

actually engaged in uh March uh of

2023 interesting so they've actually

been here for a while so they're not a

new auditor and they were hired to

perform an audit for the company uh for

their fiscal year ending this summer it

has not issued any report yet okay got

it so this would have been the first

report uh so let's write this down this

would have been their first report for

fiscal year ending June 30

2024 I'm just going to delete this

because this app sucks there we go uh

and uh they've been working I mean it's

not like they quit and and I think this

is probably the bigger concern it's not

like they just quit uh I hate this app

so much it's not like they just quit uh

after uh you you know opening the books

for like a month uh ey has been working

with this firm for 18 19

months that's crazy since they were

retained over here March 15th

2023

okay uh let's see here they resigned

while condu conducting the audit the

first

audit ER young communicated to the audit

committee concerns about several matters

relating to governance transparency and

the completeness of

communications oh that's not good okay

concerns over comms to Auditors and

governance that's not good internal

controls that's also bad like when the

one thing that destroys businesses is uh

uh bad accounting like you've got to

have good accounting at businesses in

resp response the board appointed an

independent special

committee okay to review

matters the special committee engaged a

forensic accounting firm to perform an

investigation wow okay so they made not

just an audit committee but then then a

special commit okay so special committee

hired uh a

forensic accountant to fix stuff

jeez okay after receiving additional

information uh e informed the special

committee that the additional

information uh ey received raised

questions about whether the company

demonstrates a commitment to integrity

and ethical values

wow uh results of uh

forensic uh work equal uh do you have

ethics oh my gosh

terrible uh okay in the resignation

letter ey said we are resigning to the

information that has recently come to

our attention which is which has led us

to no longer be able to rely on the

Management's and audit committee's

representations

wow that's

crazy that's

scary for an auditor to bow out

uh let's see

here okay these are some more generic

disclosures yeah that's pretty

bad uh that's pretty bad I I would say

this is um this is just something that

like what happens with something like

this is you you kill trust right uh

and remember remember what I've been

saying about this

company this is a company that tells us

they're a huge AI

beneficiary but my

suspicion uh or my sus if you will on

them has been uh they

probably lose bigly on AI servers and

make money on non AI servers and they

sort of use these as loss leaders and

I've been sused out in earnings cult

before I'm not saying like they're

frauds or whatever right uh I've just

been sus over AI margins which have sort

of imp been implied to either be very

low implied to be very low or negative

and it's

possible that uh e uh ey is going in

there going you guys are not profitable

at all on these AI server racks you're

you're just basic basically trying to

pump the stock with this AI trade and

you're lying to people and here we are

trying to you know reconstruct uh

accounting data with forensic evidence

to show like you know what what are yall

actually doing like where do yall

actually make money and y'all can't even

give us straight answers which makes us

question your ethics this is pretty bad

this is pretty bad so uh I I always I

always find this uh very

interesting and uh the stock at the

moment is down 31% which I I know

there's always a temptation to say oh

buy the dip when you get big drops like

this but an auditor resigning after

working with a company for 19 months and

my suspicions that the company has been

lying to us about AI margins from the

get-go

anyway to me this is I can't touch this

with a 10-ft pole this is like a uh uh

you know this is this is buying this is

maybe getting a good deal on a bad

company right uh it's sort of like

Warren Buffett's quote would you rather

have a good deal on a great company or a

great deal on a Bad Company he says

always take a good deal on a great

company don't don't go anywhere near you

know bad companies or mediocre companies

or whatever uh I probably butchered his

quote but this is uh this is shock

and uh I don't know that this really

carries over to the broader uh AI Market

I mean obviously it comes a day after uh

AMD is you know dropping 7.88% but I

mean it's really just going back to

where it was a couple weeks ago well and

so we'll see how it goes when when the

market actually opens here but uh when

you look at stuff like this it shows you

how tempting and and uh provocative or

seductive it could be to you know know

say you're making all this money from Ai

and then you're actually just lying but

you're getting rich through stock you

know I mean look the valuation of Super

Micro has gone from like $100 up like

10x and then it's just collapsed this

collapse is not a surprise because in my

opinion I've always stayed away from

this company I just thought it was a low

margin business and they sused me out on

their AI margins I never thought they

made money and now that you have an

auditor quitting after 19 months it's

all the red flag I need to look at this

and go I ain't going anywhere near it

now am I going to short it no because

you know then you go short it and then

it's up 10% on just a a rebound it it

take too long uh to to actually play out

but a company like that a company like

that could end up going bankrupt why not

advertise these things that you told us

here I feel like nobody else knows about

this we'll we'll try a little

advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin P there financial analy and

YouTuber meet Kevin always great to get

your take