TLDR
- Three people tied to Super Micro were indicted for allegedly smuggling Nvidia chips to China, including co-founder Wally Liaw
- SMCI lost a third of its value on Friday following the news, and is now down 26% for the year
- Nvidia has not confirmed whether it will continue supplying chips to Super Micro
- Citi cut its price target on SMCI from $39 to $25, citing elevated “reputation risk”
- Analysts say SMCI’s future depends almost entirely on whether Nvidia keeps its chip supply flowing
Super Micro’s co-founder was arrested last week on charges of helping smuggle Nvidia chips to China. The indictment also named another employee and a contractor, though Super Micro itself was not charged as a defendant.
Super Micro Computer, Inc., SMCI
Yih-Shyan “Wally” Liaw, who sits on the company’s board, is alleged to have been part of a scheme to divert Nvidia’s top-of-the-line B200 chips. The news hit SMCI stock hard — the stock dropped roughly one-third of its value on Friday alone.
The stock partially recovered Monday as markets bounced on broader geopolitical news. But SMCI is still down 26% for 2026, a rough stretch for a company that had been riding the AI spending wave.
Liaw’s history with the company adds an uncomfortable layer. He resigned in 2018 after an audit committee investigation led to a financial restatement. Super Micro brought him back in 2022 and put him on the board a year later. That decision looks worse in light of the latest charges.
This is not the first cloud hanging over Super Micro. In 2024, short seller Hindenburg Research raised concerns about the company’s accounting. That eventually led to Super Micro losing its independent auditor and triggering a Justice Department probe.
Citi Cuts Price Target
Citi analyst Asiya Merchant lowered her price target on SMCI to $25 from $39 on Monday, keeping a Neutral/High risk rating. She wrote that while the charges target individuals, customers and suppliers are likely to respond with tighter scrutiny.
“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 also flagged the situation, writing that the indictment “raises serious credibility issues that could impact business” even without the company itself being named.
Everything Rests on Nvidia
The central question for Super Micro right now is whether Nvidia keeps the chips coming. Bernstein warned that losing GPU allocations would have a “devastating impact” on the business.
Nvidia put out a statement saying export control compliance is a “top priority,” but did not directly address its relationship with Super Micro going forward.
Super Micro’s revenue more than doubled to $12.7 billion in the December quarter. It’s guiding for $40 billion in revenue for the fiscal year ending June — nearly double the prior year.
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.
The company’s gross margins hit a record low of 6.3% last quarter. Hosseini noted that executive compensation has long been tied heavily to revenue growth despite weakening financial quality.
Nvidia is set to launch its new Vera Rubin chip lineup later this year, meaning it could replace any lost Super Micro volume relatively quickly. The alleged chip smuggling also puts Nvidia in an awkward spot with the Trump administration, which has been pushing to keep advanced AI chips out of China.
Super Micro stock was trading near $35 as of Tuesday premarket.
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