Shares of Supermicro Computer (SMCI) plunged 27% Friday following federal charges against its co-founder for allegedly smuggling $2.5 billion worth of servers containing Nvidia AI chips to China. An indictment unsealed Thursday claims employees and a contractor used dummy devices and repackaging schemes to deceive U.S. inspectors. The company placed its co-founder on leave and stated the alleged actions violated its internal policies and U.S. export laws.
Supermicro Computer saw its stock price crash sharply after federal prosecutors revealed a smuggling indictment. The charges allege a scheme to illegally ship servers with high-end Nvidia chips to China.
According to the unsealed indictment, co-founder and Senior Vice President Yih-Shyan “Wally” Liaw played an alleged role in the $2.5 billion scheme. Servers were assembled in the U.S. and shipped via Taiwan before being diverted to China.
The indictment states the group attempted to deceive inspectors, including a U.S. Department of Commerce official. They allegedly used hair dryers to attach labels to dummy, nonfunctional server replicas to mimic real products.
Supermicro has placed Liaw and a second employee on leave and fired a contractor involved. U.S. Attorney Jay Clayton said the defendants used “a tangled web of lies, obfuscation, and concealment—all to drive sales and generate revenues in violation of U.S. law.”
The company stated, “The conduct by these individuals alleged in the indictment is a contravention of the Company’s policies and compliance controls.” It affirmed its commitment to adhering to all U.S. export control laws and regulations.
The stock decline of up to 27% on Friday extended its year-to-date loss to 29%. Shares are now trading near the bottom of their 52-week range.
