Share price of Super Micro Computer Inc. (NASDAQ: SMCI) is witnessing a significant sell-off as investors flock to the company following recent accounting challenges.

To recap, SMCI came under scrutiny after its auditor, Ernst & Young, resigned, citing governance, transparency, internal controls and management independence concerns.

As a result, the stock has earnings deleted from the company’s venture into artificial intelligence (AI). At the end of the last trading session, SMCI was valued at $26.05, down over 10% for the day. In the past week, the stock has fallen 45%; Year to date, SMCI is down 8.7%.

Technically, SMCI shares are showing worrisome signs on the five-year weekly chart, suggesting a challenging period ahead.

According to one analysis shared by market analysts under a pseudonym Brettrecent price action has plunged the SMCI below the crucial 50-week moving average, suggesting a shorter-term downward correction.

The stock has seen notable price growth over the past five years, but appears to be losing momentum. Overall, investor interest in the company is waning after the stock failed to hold above key support levels.

AI adopts the recovery path of SMCI

With SMCI shares seemingly in freefall, attention turned to the potential for recovery amid the accounting crisis. To that end, Finbold consulted OpenAI’s ChatGPT-4o for insights.

According to ChatGPT-4o, several factors could influence a recovery. Optimism can arise if management hires a new auditor, addresses internal controls and provides financial transparency. Market reaction, institutional interest, short-term selling pressure and broader market sentiment will also be critical.

If these factors align, ChatGPT-4o anticipates a recovery in early 2025. However, if internal issues persist, the stock could continue to decline until late 2025.

Analysts take stock of SMCI

Mizuho Securities analyst Vijay Rakesh supports the possible recovery. The analyst reiterated a “Hold” rating with a $45 price target, despite Ernst & Young’s resignation.

However, Rakesh noted that the stock faces an increased risk of delisting, especially after Nasdaq issued a non-compliance warning to the company.

SMCI management now has the opportunity to remedy these issues. It has until Nov. 16 to present a plan to file a 10-K report and secure a new credible auditor.

If the AI ​​hardware manufacturer does not meet this requirement, they risk being delisted from the exchange. SMCI will have until the end of February 2025 to file its 10-K and return to compliance, which could be an optimistic move that boosts investor confidence if it meets Nasdaq-mandated compliance.

At the same time, Rosenblatt Securities suspended its rating and price target for SMCI. Analysts are awaiting clarity on the troubled firm’s financial reporting and management practices.

Notably, SMCI’s troubles began in August after Hindenburg Research accused the firm of “accounting manipulation,” leading to a short-term stock correction.

Impact of SMCI’s Earnings Ratio

The stock’s potential recovery will also rely heavily on the upcoming earnings report scheduled for Nov. 5. If the company beats analysts’ estimates and issues strong guidance, it could be a positive sign before it fully resolves its accounting woes.

For the first quarter of 2025, SMCI is forecast to post earnings of $0.75 per share, representing a year-over-year increase of 120.6%. Meanwhile, revenue is expected to reach $6.52 billion, up 207.5% from the year-ago quarter.

In summary, with SMCI showing weakness, investors may want to remain cautious and monitor how the tech firm resolves its accounting issues.