Super Micro’s Co-Founder Was Charged With Smuggling $2.5 Billion in Nvidia Chips to China. The Stock Lost a Quarter of Its Value.

What happened: the $2.5 billion smuggling scheme

The alleged conspiracy operated between 2024 and 2025, and the mechanics were more elaborate than a simple rerouting. According to the indictment, Liaw and Chang directed executives at an unnamed Southeast Asian company to place purchase orders with Super Micro as though the servers were destined for that company’s own operations. The servers were assembled in the United States, shipped to Super Micro’s facilities in Taiwan, then delivered to the intermediary at a separate location. A shipping and logistics company would strip all identifying packaging, brand labels, and serial numbers, placing the servers in unmarked boxes before forwarding them to their actual destination: China.

To evade scrutiny from both Super Micro’s internal compliance teams and U.S. government auditors, the defendants staged thousands of "dummy" servers at the warehouse. They used hair dryers to peel off serial number stickers from real units and reaffix them to the decoys. During a three-week stretch in late April to mid-May 2025 alone, approximately $500 million worth of servers were shipped to China as part of the conspiracy.

The export controls at issue were established by the Department of Commerce’s Bureau of Industry and Security (BIS) in October 2022, targeting advanced AI accelerators. Prior enforcement actions under related statutes have focused on foreign companies: Huawei, ZTE, Kaspersky Lab. This case is unusual in that the alleged violators were insiders at an American manufacturer.

This is not sector contagion

The market’s reaction to Thursday’s indictment tells a specific story. Super Micro’s 25 percent single-day decline is roughly 4.3 times the stock’s average true range (which implies daily swings of about 5.6 percent). It is the company’s worst trading day since October 2024, when auditor Ernst & Young abruptly resigned.

But the damage is almost entirely contained to Super Micro itself.

Nvidia, whose chips were at the center of the smuggling operation, barely moved. A spokesperson for the company said compliance is "a top priority" and that "unlawful diversion of controlled U.S. computers to China is a losing proposition." Hewlett Packard Enterprise (HPE), a direct competitor, finished up 2.7 percent on the day. The market is pricing this as a governance failure specific to Super Micro, not as a systemic risk to the AI hardware supply chain.

Why this is worse than it looks: Super Micro’s third governance crisis

The criminal charges alone would constitute a severe blow for any public company. But for Super Micro, this is the third major governance crisis in six years. And the common thread is Liaw himself.

The critical detail: Liaw returned to Super Micro as an adviser in May 2021, was promoted to a full-time executive role in August 2022, and rejoined the board of directors in December 2023. The smuggling scheme allegedly began in 2024, shortly after his return to the board. The company’s special committee cleared management of fraud allegations in the Hindenburg and Ernst & Young episode just months before the DOJ unsealed an indictment involving the same co-founder.

Super Micro issued a statement Thursday: "The conduct by these individuals alleged in the indictment is a contravention of the Company’s policies and compliance controls." The company placed Liaw and Chang on administrative leave, terminated its relationship with Sun, and emphasized that it is "not a defendant in the indictment."

To be sure, the company is cooperating with the federal investigation, and no charges have been brought against Super Micro as an entity. But the board’s decision to allow Liaw to return after the 2018 scandal is now under intense scrutiny, and the indictment references "others known and unknown to the grand jury." The investigation may not be finished.

The fundamentals were already deteriorating

Prior to Friday’s collapse, 13 Wall Street analysts covering SMCI held a consensus Hold rating with a median price target of approximately $39.50 to $42.38. At $23, the stock now trades 38 to 45 percent below those targets. Expect significant revisions.

The business was under pressure well before the indictment. Fiscal 2026 first-quarter revenue dropped 15 percent year over year to $5 billion. Profit margins declined to 3.1 percent from 6.9 percent a year earlier. Management has guided full-year fiscal 2026 revenue to $36 billion (a 50 percent increase), but the market has been skeptical: Super Micro has consistently missed its own guidance for over a year, and competitors like Dell Technologies have been gaining share in the AI server market.

What comes next

The near-term risks are specific and identifiable. The most consequential: whether Nvidia will impose additional compliance requirements on Super Micro’s chip allocations to protect its own regulatory standing. Any formal restriction would be devastating to Super Micro’s core business. Enterprise buyers evaluating AI infrastructure may pause or redirect orders to Dell or HPE. Analyst downgrades will likely follow as firms digest the legal exposure.

The medium-term risks are broader. Companies whose employees violate export controls can face debarment from government contracts and restricted access to controlled technology. The accounting controls questions raised by Hindenburg and Ernst & Young in 2024 look materially different in light of an alleged $2.5 billion diversion occurring during the same period. And the SEC, which has already penalized Super Micro once, will be watching.

The indictment names three individuals. The scheme, according to prosecutors, involved more. Only time will tell whether the investigation widens, but Super Micro’s track record of governance failures offers little basis for optimism.