Why SuperX AI Technology Stock Was Wilting This Week

According to data compiled by S&P Global Market Intelligence, SuperX AI Technology (NASDAQ: SUPX) was sliding by 25% in price week-to-date as of early Friday afternoon. The company announced that it was tapping institutional investors for a new round of financing, stoking concerns about its financial situation and raising fears about share dilution.

Not so super

On Tuesday, SuperX disclosed in a regulatory filing that on Nov. 11, it entered into a pair of private placement subscription agreements with two institutional investors it did not name. SuperX is selling a total of 1.8 million units, consisting of one ordinary share of the company and one-third of a warrant to purchase a single ordinary share.

The sale of the units closed on Nov. 19, and the company issued the 1.8 million shares. It was paid a gross amount of $23.4 million by the purchasers. It added that its take could increase by an extra $7.8 million if every accompanying warrant were to be exercised in full.

In the filing, SuperX said that it planned to use the proceeds of the issue to help fund the production, and research and development, of artificial intelligence (AI) servers. It will also explore potential investments elsewhere in the AI sphere, bolster its working capital and devote funds to "general corporate purposes."

Uncomfortable timing

SuperX's timing on this announcement wasn't ideal, as it came when investors were pulling back from AI stocks (and affiliated titles) on lingering fears that they might be overvalued. SuperX is particularly vulnerable here, as the stock enjoyed quite a run-up before the market started to worry.

As an AI infrastructure specialist, the company has an appealing business profile, in my opinion, but until it starts booking consistent bottom-line profits, I'd give its stock a miss.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.