.September 6, 2024 12:43 PM

Super Micro Computer (NASDAQ:SMCI) shares dropped over 6% today after JPMorgan downgraded the company to Neutral from Overweight, with a new price target of $500 from $950. The downgrade is due to concerns about regulatory filings delay and internal control evaluation.

Despite the downgrade, analysts believe Super Micro can resolve regulatory issues, but uncertainty around compliance and its impact on AI server margins has created a cautious outlook for the stock.

The downgrade is not related to doubts about the company’s fundamentals or the Hindenburg report claims. Instead, it focuses on regulatory compliance uncertainty and competitive dynamics in the AI server market.

Analysts see meeting regulatory requirements as a positive catalyst for the stock, but full recovery to prior valuation levels will require reassurance about stable customer demand and margin sustainability amid challenges.