Key Takeaways
- Federal prosecutors indicted three individuals connected to Super Micro Computer for allegedly smuggling Nvidia chips to China, including board member and co-founder Wally Liaw
- SMCI shares plummeted by approximately 33% on Friday and remain down 26% for 2026
- Nvidia has not publicly stated whether it will maintain its chip supply relationship with Super Micro
- Citi downgraded its SMCI price target from $39 to $25, pointing to significant “reputation risk”
- Wall Street analysts believe SMCI’s outlook hinges on Nvidia’s decision to continue or halt chip deliveries
Federal authorities arrested Super Micro Computer’s co-founder last week on allegations of orchestrating a smuggling operation involving Nvidia’s advanced chips destined for China. The criminal indictment named two additional individuals—a company employee and an external contractor—though Super Micro itself was not listed as a corporate defendant.
Super Micro Computer, Inc., SMCI
Yih-Shyan “Wally” Liaw, currently serving on the company’s board of directors, allegedly participated in a conspiracy to illegally export Nvidia’s cutting-edge B200 processors. The revelation sent shockwaves through the market—SMCI shares lost approximately one-third of their value in a single trading session on Friday.
Although Monday brought a modest rebound thanks to broader market optimism driven by geopolitical developments, SMCI shares remain underwater by 26% since the start of 2026. This represents a significant setback for a company that had been capitalizing on surging artificial intelligence infrastructure spending.
Liaw’s track record with the organization raises additional concerns. He stepped down from the company in 2018 following an internal audit committee probe that resulted in financial restatements. Super Micro rehired him in 2022 and appointed him to its board in 2023. That decision now appears questionable given the current federal charges.
Super Micro has weathered previous controversies. In 2024, prominent short seller Hindenburg Research published allegations questioning the company’s accounting practices. The fallout included the departure of Super Micro’s independent auditor and initiated a Justice Department investigation.
Wall Street Slashes Expectations
Citi’s Asiya Merchant reduced her SMCI price objective to $25 from $39 on Monday while maintaining a Neutral rating with a High risk designation. She explained that despite the charges targeting specific individuals rather than the corporation, customers and chip suppliers will likely implement stricter oversight measures.
“We believe this warrants a lower valuation until there is more visibility on the path forward,” Merchant stated. SMCI shares traded slightly lower in Tuesday’s premarket session.
Analysts at Bernstein Research echoed similar concerns, noting that the indictment “raises serious credibility issues that could impact business” despite the company not being formally charged.
Nvidia Holds the Keys
The critical question facing Super Micro centers on whether Nvidia will continue its chip allocations. Bernstein analysts cautioned that a suspension of GPU shipments would deliver a “devastating impact” to Super Micro’s operations.
Nvidia issued a brief statement emphasizing that export control compliance remains a “top priority,” but stopped short of clarifying its plans regarding the Super Micro partnership.
Super Micro reported that revenue more than doubled to $12.7 billion during the December quarter. Management projects $40 billion in total revenue for the fiscal year concluding in June—representing nearly 100% growth compared to the previous year.
Susquehanna analyst Mehdi Hosseini argued that the indictment “only underscores the urgency” of replacing CEO Charles Liang with an external candidate and installing fully independent board members.
The company posted record-low gross margins of just 6.3% in its most recent quarter. Hosseini observed that executive pay structures have historically emphasized revenue expansion despite deteriorating profitability metrics.
Nvidia plans to introduce its next-generation Vera Rubin chip architecture later this year, potentially allowing the company to redirect any Super Micro allocation to alternative partners swiftly. The alleged smuggling scheme also places Nvidia in a politically sensitive position with the Trump administration, which has prioritized preventing advanced AI technology from reaching China.
Super Micro shares were hovering around $35 in Tuesday’s premarket trading.
