Super Micro Computer, one of the hottest AI plays alongside Nvidia, tanks 10% on share offering

Shares of Super Micro Computer dropped on Tuesday after the company announced a new share offering, taking a bite out of one of the biggest rallies tied to the AI boom.

The company said in a filing Tuesday morning that it plans to sell 2 million additional shares of common stock, pushing its total shares outstanding to over 58 million.

The shares were down 10% in premarket trading.

“The principal purposes of this offering are to obtain additional capital to support our operations, including for the purchase of inventory and other working capital purposes, manufacturing capacity expansions and increased research and development (‘R&D’) investments,” the filing said.

Goldman Sachs is the underwriter for the new share offering. Goldman also has an option to purchase up to 300,000 additional shares of Super Micro within the next 30 days.

Super Micro Computer, a tech infrastructure company, has become one of the biggest winners of Wall Street’s appetite for AI investments. Its stock has surged more than 900% over the past year prior to Tuesday’s decline, outpacing even Nvidia.

The recent advancements in AI, including large language models like ChatGPT, require increased computing power and data storage. That has led investors to focus on chipmakers like Nvidia and server infrastructure companies like Super Micro as the first wave of beneficiaries.

Super Micro is a fast-growing company, but still relatively small compared to the tech giants that have also seen a stock rally fueled by the interest in AI. The company reported $3.66 billion in net sales for the fourth quarter, up more than 100% year over year. It generated net income of nearly $300 million.

Notably, Super Micro has seen some of its insiders sell their own shares of the company in recent months. CEO Charles Liang sold about 1,000 shares in January that were attributed to his spouse. Director Daniel Fairfax has sold 900 shares across three different days so far this year.

The sales of both Liang and Fairfax were part of formal stock sale plans, according to VerityData and the filings. But other transactions, including a sale of 5,000 shares from director Sherman Tuan, did not appear to be part of such plans.

Director Shiu Leung Chan did buy 2,000 shares on Feb. 1, though he resigned as director on March 11. Super Micro said that the resignation was to focus on family owned business projects and not any disagreements with the company.