NEW YORK — Super Micro Computer Inc. shares cratered nearly 28% on Friday morning after the U.S. Attorney's Office for the Southern District of New York unsealed a criminal indictment charging three individuals with ties to the company for conspiring to divert approximately $2.5 billion in restricted AI server technology to China, in what prosecutors described as the most significant crackdown on AI chip smuggling ever prosecuted under U.S. export control law.
Among those charged is Yih-Shyan 'Wally' Liaw, the company's co-founder, Senior Vice President of Business Development, and a sitting member of Supermicro's board of directors. Liaw was arrested Thursday. Also charged are Ruei-Tsang 'Steven' Chang, a Taiwan-based sales manager, and Ting-Wei 'Willy' Sun, a contractor. Supermicro said it placed the two employees on administrative leave and terminated its relationship with the contractor effective immediately, and reiterated that the company itself is not a named defendant in the indictment.
According to the indictment, the alleged conspiracy operated primarily between 2024 and 2025, during which the defendants allegedly coordinated the shipment of hundreds of millions of dollars' worth of Supermicro-assembled servers containing Nvidia's most advanced processors to Chinese buyers via an unnamed Southeast Asian intermediary company. Prosecutors allege the group shipped approximately $510 million in servers over a three-week span in spring 2025 alone, using fabricated documentation, dummy server units staged to deceive compliance inspectors, and the physical removal of identifying labels and serial numbers to conceal the true destination of the hardware.
Bernstein analyst Mark Newman said the charges raise serious credibility questions for the company even though Supermicro is not a named defendant. Newman noted that this is not Supermicro's first governance crisis: the company settled SEC charges of accounting fraud in 2020 for $17.5 million and faced fresh allegations of financial manipulation from short-seller Hindenburg Research in 2024. Newman also raised the possibility that Nvidia might feel compelled to further distance itself from Supermicro as a key customer, a development that could have severe consequences given Supermicro's dependence on GPU supply.
Nvidia's own shares dipped modestly on Friday, with analysts emphasizing that the chipmaker appears to have no culpability in the alleged scheme. Nevertheless, the episode is likely to intensify regulatory scrutiny of the entire AI hardware supply chain, potentially accelerating enforcement actions against other server assemblers and distributors operating in jurisdictions adjacent to China.
For investors, the collapse brings SMCI shares to new 52-week lows and wipes out approximately $5 billion in market capitalization in a single session. The stock, which once surged 1,400% during its AI-era peak in early 2024, is now nearly 80% below those highs. With a co-founder arrested, compliance controls under renewed scrutiny, and GPU supply potentially at risk, the risk-reward calculus for the stock appears deeply unfavorable in the near term.