Supermicro (SMCI) stock plummeted as much as 28% on Friday after an unsealed indictment revealed that the US charged two Supermicro employees and a contractor with smuggling servers containing Nvidia (NVDA) chips to China, in violation of US export controls.
The US Attorney’s Office for the Southern District of New York charged Supermicro’s co-founder, Yih-Shyan “Wally” Liaw, a US citizen who also serves on the company’s board of directors and as 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 send $2.5 billion worth of US-made servers to China between 2024 and 2025.
The indictment said the three people involved sold the AI technology to a pass-through company in Southeast Asia, knowing it would be sent to the US adversary. They allegedly forged documents and staged thousands of “dummy” servers — replicas of the original servers — for inspection at the Southeast Asian company, while the actual servers were unlawfully forwarded to China.
Supermicro said that 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, accounting for about 9% of the chip giant’s revenue, per Bloomberg.
The stock saw a huge rise in 2024 as the company rode the booming demand for AI servers. But the stock has come under pressure, falling 42% over the past year, amid a string of scandals.
In the summer of 2024, short-selling firm Hindenburg Research released a report accusing the company of violating export controls and accounting red flags. Supermicro then delayed its quarterly and annual filings to the Securities and Exchange Commission, and its accountant resigned. The company narrowly avoided a Nasdaq delisting.
An independent review of the company found no substantial concerns as of December 2024.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
