Shares of Supermicro (SMCI) plunged 33% on Friday after an open indictment revealed that the United States charged two Supermicro employees and a contractor with smuggling servers containing Nvidia (NVDA) chips to China, in violation of US export controls.
The U.S. Attorney’s Office for the Southern District of New York charged Supermicro co-founder Yih-Shyan “Wally” Liaw, a U.S. citizen who also serves on the company’s board of directors and is senior vice president of business development. Ruei-Tsang “Steven” Chang, a sales manager in Taiwan, and Ting-Wei “Willy” Sun, a contractor who was described by authorities as a “fixer,” were also charged.
Prosecutors alleged that the trio was involved in a scheme to ship US-made servers worth $2.5 billion to China between 2024 and 2025.
The indictment says the three people involved sold the AI ​​technology to a transfer company in Southeast Asia, knowing it would be sent to the American adversary. They allegedly falsified documents and set up thousands of “dummy” servers (replicas of the original servers) for inspection at the Southeast Asian company, while the real servers were illegally forwarded to China.
Supermicro said it placed the two employees on administrative leave and terminated its relationship with the contractor, effective immediately.
California-based Supermicro is a key assembler of AI servers powered by Nvidia components and accounts for about 9% of the chip giant’s revenue, according to Bloomberg.
The stock saw a big rise in 2024 as the company took advantage of growing demand for AI servers. But the shares have come under pressure, falling 42% over the past year, amid a series of scandals.
In the summer of 2024, short-selling firm Hindenburg Research published a report accusing the company of violating export controls and accounting red flags. Supermicro then delayed its quarterly and annual filings with the Securities and Exchange Commission and its accountant resigned. The company narrowly avoided a Nasdaq delisting.
An independent review of the company found no material concerns as of December 2024.
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