NEW YORK: Super Micro Computer reported quarterly adjusted gross margin below estimates on Tuesday, as high costs tied to the production of servers with the latest artificial intelligence (AI) chips weighed on profits, sending its shares down 14% and dragging chipmakers.

Its shares, which have more than doubled this year on expectations of booming AI computing demand, swung wildly after announcements of the results and a stock split.

They initially jumped 12% in extended trading before reversing course.

Nvidia shares, which rose 3% in trading after the bell, reversed course and fell 2%. Shares of Arm Holdings and AMD fell 2.1% and 1.2%, respectively, while those of rival Dell Technologies were down about 5%.

AI-related stocks have come under immense pressure following a relentless rally for most of this year, amid worries about the high cost of building new data centres and other infrastructure to power the new technology.

The company also forecast profit below Wall Street targets but estimated first quarter and annual sales above estimates.

“The initial aftermarket reaction was better than I thought it would be,” Running Point Capital chief investment officer Michael Ashley Schulman said.

“The focus must have been on the higher-than-expected 2025 estimates, but as you dig through the numbers, all the actual misses and especially the much lower-than-expected gross margin may make portfolio managers question whether management can effectively and efficiently scale to handle the growth.”

Chief executive officer (CEO) Charles Liang said on a conference call with analysts that margins would return to a normal range before the end of the financial year 2025.

The company reiterated its gross margin target of a range of 14% to 17%.

The company’s fourth quarter adjusted gross margin was 11.3%, compared with analysts’ average estimate of 14.1%, according to LSEG data.

Competitive pricing also impacted gross margin, chief financial officer (CFO) David Weigand said on the call. The company has resorted to lowering prices for its servers to stave off competition from rivals like Dell and HP Enterprise.

Super Micro expects adjusted profit between US$6.69 to US$8.27 per share for the first quarter, the midpoint of which is below estimates of US$7.58.

Analysts have questioned the company’s hefty spending on supporting a new generation of AI chips, such as those sold by Nvidia.

The company is also grappling with higher supply chain costs and a tight supply of key components, CFO Weigand said.

Super Micro expects net sales between US$6bil to US$7bil for the first quarter, compared to analysts’ average estimate of US$5.46bil, according to LSEG data.

Analysts also peppered executives with questions over potential delays in shipments of Nvidia’s latest Blackwell processors.

CEO Liang said the overall impact from a possible delay “should not be too much”.

 - Reuters