Shares of Super Micro Networks fell dramatically by 28% on Friday, following the indictment of three individuals associated with the company, including its co-founder. U.S. prosecutors have charged these individuals with involvement in a scheme to smuggle billions of dollars worth of artificial intelligence technology to China. Although Super Micro, a prominent AI server manufacturer that utilizes Nvidia’s chips, was not named as a defendant in the case, the company confirmed its cooperation with the investigation.
The plunge in share price could potentially wipe out over $5 billion from Super Micro’s market valuation, which currently stands at approximately $18.49 billion. Analysts from Melius Research have expressed concerns that the company’s revenue could be severely impacted as customers reevaluate their relationships with suppliers amid the ongoing legal troubles. The firm pointed out that Dell may emerge as a primary beneficiary due to its larger scale and stronger connections with Nvidia, a sentiment reflected in a 6% rise in Dell’s shares.
The charges brought forth by the U.S. Justice Department include allegations against co-founder Yih-Shyan Liaw, sales manager Ruei-Tsang Chang, and contractor Ting-Wei Sun for orchestrating a plan to reroute U.S.-manufactured servers through Taiwan to Southeast Asia. Once in Southeast Asia, these products were allegedly repackaged into unmarked boxes and smuggled into China. Prosecutors claim that at least $2.5 billion in U.S. AI technology was unlawfully transported, with over half a billion dollars’ worth shipped between April and mid-May of 2025.
In response to the unfolding scandal, Super Micro has placed the implicated employees on leave and severed ties with the contractor involved in the scheme. The U.S. government has imposed strict export controls on semiconductor technology since 2022, aimed at preventing the Chinese military from accessing such technologies and hindering the nation’s AI advancements.
Investor sentiment has shifted considerably, with portfolio manager Hendi Susanto from Gabelli Funds highlighting a host of risks associated with the current situation. He pointed out that investors would likely consider the potential for increased scrutiny, extensive audits, and costs, along with the possibility of a damaged reputation. Such factors might lead to customers distancing themselves from the company and encourage Nvidia to favor other server manufacturers.
While surging demand for AI chips had propelled Super Micro’s valuation to a peak of $67 billion in 2024, a combination of margin pressures related to server construction and negative allegations from the now-defunct short-seller Hindenburg has since contributed to the stock’s downturn.
