Key Points
- Federal prosecutors indicted three individuals connected to Super Micro for allegedly smuggling Nvidia chips to China, with co-founder Wally Liaw among those charged
- SMCI shares plunged by roughly one-third on Friday, bringing year-to-date losses to 26%
- Nvidia remains silent on whether chip supplies to Super Micro will continue
- Citi downgraded SMCI’s price target from $39 to $25, pointing to heightened reputational concerns
- Wall Street analysts believe SMCI’s prospects hinge on maintaining its Nvidia chip allocation
Federal authorities arrested Super Micro’s co-founder last week on allegations of orchestrating a scheme to smuggle Nvidia chips to China. The indictment named two additional individuals—another company employee and an outside contractor—though Super Micro as an entity faces no criminal charges.
Super Micro Computer, Inc., SMCI
Yih-Shyan “Wally” Liaw, who currently serves on the company’s board of directors, allegedly participated in a conspiracy to redirect Nvidia’s advanced B200 chips. The market reaction was severe—SMCI stock shed approximately one-third of its market value during Friday’s trading session.
Shares experienced a modest rebound on Monday as broader market sentiment improved following international developments. However, SMCI remains down 26% since the start of 2026, marking a difficult period for a company that had previously benefited from surging AI infrastructure demand.
Liaw’s connection to the company carries additional complexity. He stepped down from his position in 2018 following an internal audit committee review that resulted in financial restatements. Super Micro rehired him in 2022 and appointed him to the board in 2023. The recent criminal charges cast that decision in a troubling light.
Super Micro has faced scrutiny before. During 2024, short seller Hindenburg Research published concerns regarding the company’s accounting practices. Those allegations ultimately resulted in Super Micro parting ways with its independent auditor and attracting a Justice Department investigation.
Citi Reduces Price Target
Citi analyst Asiya Merchant adjusted her price target on SMCI downward to $25 from $39 on Monday, maintaining a Neutral/High risk rating. She indicated that despite the charges targeting individuals rather than the corporation, customers and suppliers will likely increase oversight and due diligence.
“We believe this warrants a lower valuation until there is more visibility on the path forward,” Merchant wrote. Super Micro stock was down fractionally in premarket trading Tuesday.
Bernstein Research analysts similarly highlighted concerns, stating that the indictment “raises serious credibility issues that could impact business” despite the company itself avoiding prosecution.
Nvidia Relationship Holds the Key
The most pressing question facing Super Micro centers on whether Nvidia will maintain its chip supply relationship. Bernstein cautioned that any disruption to GPU allocations would deliver a “devastating impact” on Super Micro’s operations.
Nvidia issued a statement emphasizing that export control compliance remains a “top priority,” though the company avoided directly commenting on its future dealings with Super Micro.
Super Micro’s revenue surged to $12.7 billion during the December quarter, representing more than double the previous year’s figure. Company guidance projects $40 billion in revenue for the fiscal year ending in June—approaching double the prior fiscal year’s total.
Analyst Mehdi Hosseini of Susquehanna said the indictment “only underscores the urgency” of replacing CEO Charles Liang with an outsider and bringing in fully independent board members.
Gross margins at the company reached a record low of 6.3% during the most recent quarter. Hosseini observed that executive compensation structures have historically emphasized revenue growth over financial quality metrics.
Nvidia plans to introduce its new Vera Rubin chip lineup later this year, giving the company flexibility to redirect any Super Micro allocation to alternative partners. The alleged smuggling operation also creates diplomatic tension for Nvidia with the Trump administration, which has prioritized preventing advanced AI chip exports to China.
Super Micro stock traded around $35 during Tuesday’s premarket session.
