Keeping SMCI shares until the situation improves could be a reasonable approach if you believe the intrinsic value is solid and the company has potential to recover. Here are some key points to weigh when making this decision:

1. Intrinsic Value and Business Strength

  • SMCI operates in the high-growth fields of AI, data centers, and cloud computing. Demand in these sectors is projected to continue rising, and SMCI’s partnerships with leading tech firms (like NVIDIA) enhance its appeal. If the allegations are resolved or downplayed, SMCI’s core business and technologies could support a recovery in stock value.
  • The company’s strong operational foundation and growth rate over recent years may mean that current issues, while impactful, do not undermine the business fundamentals, potentially making the stock undervalued right now​.

2. Potential for Revaluation

  • If SMCI addresses the allegations effectively and clears up regulatory concerns, investor confidence may return, potentially driving the stock price back up. For instance, if investigations result in minor penalties or no substantial findings, the market could view the stock as oversold, leading to a rebound. Holding onto the stock in anticipation of a recovery could yield gains if these risks are mitigated.

3. Risks of Holding

  • However, there are risks associated with holding an undervalued stock in a company under investigation. Negative findings from regulatory bodies could result in penalties, loss of partnerships, or even delisting, all of which would adversely impact the stock’s value and marketability. Additionally, any prolonged uncertainty could erode value as investors become more risk-averse.
  • Volatility is another factor. Stocks of companies facing legal and financial scrutiny often experience significant price swings, which could increase the risk in the short term.

4. Long-Term Investment Perspective

  • If you are a long-term investor with tolerance for risk, you might consider holding the shares if you believe in SMCI’s industry positioning and the value of its assets. With AI and cloud computing demand expected to grow, SMCI’s products may have strategic value that could eventually lead to recovery, merger opportunities, or even an acquisition by a larger player if the company faces extended challenges.

Conclusion

Holding SMCI shares while awaiting improvement could be beneficial if you have a long-term horizon and the ability to weather potential volatility. If SMCI can resolve the allegations without significant damage, the intrinsic value could indeed lead to a price rebound. However, diversifying your investment to mitigate risks and monitoring any updates on the allegations are also prudent steps.

About SMCI

Super Micro Computer, Inc. is an application-optimized Total IT solution. The Company provides Silicon Valley-based provider of accelerated compute platforms that are application-optimized server and storage systems for a variety of markets, including enterprise data centers, cloud computing, artificial intelligence (AI), fifth generation (5G) and edge computing. Its Total IT Solutions includes complete servers, storage systems, modular blade servers, blades, workstations, full rack scale solutions, networking devices, server sub-systems, server management and security software. It also provides global support and services to help its customers install, upgrade and maintain their computing infrastructure. Its products include servers & storage, building blocks, IoT & embedded, networking, and workstations & gaming products. IoT & Embedded products include Embedded SuperServers, Embedded Motherboards, Embedded Chassis and Global SKUs. It operates in the United States, Asia and Europe.

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