Key Takeaways
- Federal prosecutors indicted three individuals connected to Super Micro Computer, including co-founder Wally Liaw, for allegedly orchestrating a scheme to smuggle Nvidia chips to China
- SMCI shares plummeted over 30% on Friday following the indictment announcement and remain down 26% year-to-date
- Nvidia has not publicly stated whether it will maintain its chip supply relationship with Super Micro
- Citi analysts slashed SMCI’s price target from $39 to $25, highlighting significant “reputation risk” concerns
- Industry analysts indicate Super Micro’s business viability hinges on preserving its Nvidia chip allocation
Federal authorities arrested Super Micro Computer’s co-founder last week on allegations of orchestrating an illegal smuggling operation involving Nvidia’s advanced processors destined for China. The indictment encompasses two additional individuals—another company employee and an external contractor—though Super Micro itself faces no criminal charges at this time.
Super Micro Computer, Inc., SMCI
Yih-Shyan “Wally” Liaw, a current board member, allegedly participated in a conspiracy to illegally divert Nvidia’s cutting-edge B200 processors. The revelation triggered a severe market reaction—SMCI shares collapsed by approximately one-third during Friday’s trading session.
Shares staged a modest recovery Monday amid broader market optimism tied to geopolitical developments. Nevertheless, SMCI remains underwater by 26% in 2026, marking a dramatic reversal for a company that previously benefited from surging artificial intelligence infrastructure investments.
Liaw’s corporate history compounds the controversy. He departed the company in 2018 following an internal audit committee inquiry that resulted in financial restatements. Super Micro reinstated him in 2022 before elevating him to the board in 2023. That reinstatement decision now faces intense scrutiny given the federal allegations.
This represents the second major controversy surrounding Super Micro in recent years. In 2024, Hindenburg Research published concerns regarding the company’s financial reporting practices. Those allegations ultimately resulted in Super Micro parting ways with its independent auditor and prompted a Justice Department investigation.
Wall Street Slashes Projections
Citi analyst Asiya Merchant reduced her SMCI price objective to $25 from $39 on Monday while maintaining a Neutral/High risk designation. She noted that despite the charges targeting specific individuals rather than the corporation, customers and suppliers will likely implement heightened due diligence measures.
“We believe this warrants a lower valuation until there is more visibility on the path forward,” Merchant stated in her research note. SMCI shares traded slightly lower in Tuesday’s premarket session.
Bernstein Research analysts similarly highlighted the severity of the situation, noting the indictment “raises serious credibility issues that could impact business” regardless of the company avoiding formal charges.
Nvidia Relationship Holds the Key
The critical factor determining Super Micro’s trajectory centers on whether Nvidia continues allocating GPUs to the company. Bernstein cautioned that any reduction in processor allocations would deliver a “devastating impact” to operations.
Nvidia issued a statement emphasizing that export control compliance represents a “top priority,” though the company conspicuously avoided commenting on its ongoing relationship with Super Micro.
Super Micro reported revenue exceeding $12.7 billion during the December quarter, representing more than a 100% increase. Management projects approximately $40 billion in revenue for the fiscal year concluding in June—nearly double the previous year’s total.
Susquehanna analyst Mehdi Hosseini argued the indictment “only underscores the urgency” of installing an external CEO to replace Charles Liang and appointing genuinely independent board directors.
The company’s gross profit margins deteriorated to a record low of 6.3% in the most recent quarter. Hosseini observed that executive compensation structures have historically emphasized revenue expansion despite deteriorating financial quality metrics.
Nvidia plans to introduce its next-generation Vera Rubin processor architecture later this year, potentially enabling the company to reallocate any Super Micro volume to alternative partners relatively seamlessly. The alleged smuggling operation also creates political complications for Nvidia with the Trump administration, which has prioritized preventing advanced AI processors from reaching China.
SMCI stock traded near $35 in Tuesday’s premarket activity.
