SMCI: There's Never Just One Cucaracha

"We are in the golden age of fraud" -Jim Chanos (See Also Here)

Shares of the once red-hot hardware AI play Super Micro Computer (SMCI) are down by about a third of their value today as the lead auditor of the company, Ernst & Young LLP, resigned as its registered public accounting firm. The inference many are drawing is one of financial fraud, and the market is punishing the stock in kind. 

Now, the pertinent issue for us is whether SMCI is an isolated example--An aberration of sorts. If so, then AI bulls will probably continue on their merry way unabated. 

That said, the old phrase, "There is never just one cockroach in the kitchen," comes to mind, especially in a sector so interconnected as AI. Put another way, the pin action of all the AI-buzzword-using stocks has absolutely been part and parcel of their explosive rallies for quarters on end, with NVDA the obvious ringleader at the top of the pyramid. 

So, if a highly visible momentum winner like SMCI is now being punished by the market as a fraud, are there others on tap?

One would be wise to not to overlook Jim Chanos, the famous short-seller who nailed Enron nearly twenty-five years ago. He has been describing the current market as the "golden age for fraud" for a good while now. But now we have some actual evidence of the market, perhaps, coming around to that idea slowly but surely--He described a kind of "legal fraud," where firms may be technically reporting honestly but are dressing up the numbers behind the scenes. 

In other words, I absolutely believe there are other SMCI's out there, and in due time they will be uncovered slowly but surely. The accommodative Treasury Secretary and milquetoast Fed have prolonged the inevitable, but inevitable it still is.