Key Takeaways
- Federal prosecutors indicted three individuals connected to Super Micro Computer for allegedly smuggling Nvidia chips to China, including co-founder Wally Liaw
- SMCI shares plummeted by one-third on Friday and remain down 26% year-to-date in 2026
- Nvidia remains silent on whether it will maintain its chip supply agreement with Super Micro
- Citi analysts reduced their SMCI price target from $39 to $25 due to heightened “reputation risk”
- Industry experts believe Super Micro’s prospects rest entirely on maintaining Nvidia’s chip allocations
Federal authorities arrested Super Micro’s co-founder last week on allegations of orchestrating an illegal scheme to export Nvidia chips to China. The indictment named an additional employee and a contractor, while the company itself avoided criminal charges.
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 divert Nvidia’s advanced B200 processors. The announcement devastated SMCI shares — investors fled the stock, sending it down approximately 33% on Friday’s trading session.
Monday brought a modest recovery as broader market sentiment improved on geopolitical developments. However, SMCI remains in negative territory for 2026, down 26% year-to-date, marking a dramatic reversal for a company that had previously benefited from the artificial intelligence investment boom.
Liaw’s corporate track record compounds the current crisis. He departed the organization in 2018 following an audit committee probe that resulted in restated financial statements. Super Micro rehired him in 2022 and appointed him to the board in 2023. That rehabilitation now appears increasingly questionable given the criminal allegations.
The company has faced scrutiny before. During 2024, short seller Hindenburg Research published allegations questioning Super Micro’s accounting practices. Those claims resulted in the company parting ways with its independent auditor and initiated a Justice Department investigation.
Wall Street Downgrades SMCI
Citi analyst Asiya Merchant revised her price target downward on SMCI to $25 from $39 on Monday, maintaining a Neutral rating with High risk designation. She noted that while individuals face the charges, customers and suppliers will likely intensify their due diligence.
“We believe this warrants a lower valuation until there is more visibility on the path forward,” Merchant stated. Super Micro shares edged slightly lower during Tuesday’s premarket session.
Bernstein Research analysts echoed concerns in their coverage, stating that the indictment “raises serious credibility issues that could impact business” despite the company avoiding formal charges.
Nvidia’s Decision Determines SMCI’s Fate
The critical issue facing Super Micro centers on whether Nvidia continues chip shipments. Bernstein cautioned that termination of GPU allocations would deliver a “devastating impact” to operations.
Nvidia released a brief statement emphasizing that export control compliance remains a “top priority,” while stopping short of clarifying its future plans regarding Super Micro.
Super Micro reported revenue that surged past $12.7 billion during the December quarter. The company projects $40 billion in revenue for the fiscal year concluding in June — approaching double the previous year’s performance.
Susquehanna analyst Mehdi Hosseini argued the indictment “only underscores the urgency” for replacing CEO Charles Liang with external leadership and installing genuinely independent board members.
The company reported record-low gross margins of 6.3% in the most recent quarter. Hosseini observed that executive pay structures have historically emphasized revenue expansion over financial quality metrics.
Nvidia plans to debut its Vera Rubin chip architecture later this year, providing the company flexibility to redirect any Super Micro allocation to alternative partners. The alleged smuggling operation creates additional complications for Nvidia with the Trump administration, which has prioritized preventing advanced AI processors from reaching China.
Super Micro shares traded around $35 during Tuesday’s premarket hours.
