Supermicro plunges 28% as co‑founder faces U.S. charges for smuggling Nvidia chips to

Supermicro’s board was rocked on Thursday when the Southern District of New York unsealed an indictment accusing co‑founder and board member Wally Lia Liaw of conspiring to violate U.S. export controls. According to the U.S. Attorney’s Office, Liaw worked with a Taiwan‑based Supermicro employee, Steven Chang, and a contractor, Willy Sun, to ship roughly $2.5 billion worth of Nvidia AI‑chip servers to Chinese customers without the required licenses (Financial Times). The indictment marks the largest U.S. enforcement action to date alleging that Nvidia’s high‑performance chips were smuggled into China via one of its biggest server partners.

The three suspects were arrested in New York on Thursday, but Chang, a Taiwanese citizen who served as a sales manager in Taiwan, remains a fugitive, the Department of Justice said in a press release (Financial Times). Neither Liaw nor Sun have been released for comment, and Supermicro itself was not named as a defendant in the case (Financial Times). The company, which reported $18.5 billion in revenue last year and packages Nvidia’s AI chips into servers for a range of customers—including U.S. tech firms—issued a brief statement emphasizing its “robust compliance programme” and commitment to “full adherence to all applicable US export and re‑export control laws and regulations” (Financial Times).

The timing of the charges dovetails with a broader policy shift in Washington. In December, the Trump administration struck a deal that would allow Nvidia to ship its older but still powerful H200 chips to China, a concession that has been closely watched by industry players (Financial Times). Nvidia CEO Jensen Huang has repeatedly lobbied against U.S. restrictions, arguing that they hamper the company’s growth and the broader AI ecosystem (Financial Times). However, successive administrations have tightened export controls on advanced AI hardware, and the current case underscores the heightened scrutiny applied to downstream partners like Supermicro.

Market reaction was swift. Supermicro’s shares slumped as much as 28 percent on Friday, the steepest decline since the company’s 2022 earnings surge (Reuters). Analysts cited the indictment as a “material risk” to the firm’s reputation and its ability to continue serving both domestic and international customers (Bloomberg). The drop also raised concerns about potential downstream effects on Nvidia, whose chips are integral to Supermicro’s server offerings. While Nvidia has not commented publicly, the company’s stock has remained relatively stable, suggesting investors are separating the alleged misconduct of a single partner from broader demand for its AI hardware (Reuters).

Legal experts note that the case could set a precedent for how U.S. authorities pursue export‑control violations involving complex supply chains. The indictment alleges that Liaw, Sun and Chang used “deceptive shipping practices” to conceal the true destination of the servers, a tactic that, if proven, could lead to significant penalties for both individuals and corporate entities (Financial Times). The Department of Justice has indicated that it will continue to target “any person or entity that knowingly circumvents U.S. export laws,” signaling that further investigations into other server manufacturers or distributors are possible (Financial Times).

For Supermicro, the immediate challenge is damage control. The company must reassure investors, customers, and regulators that its compliance framework can prevent future breaches. In a brief filing, Supermicro’s board said it would cooperate fully with law‑enforcement agencies and conduct an internal review of its export‑control processes (Financial Times). The outcome of that review, and any potential civil or criminal penalties, will likely shape the firm’s trajectory in a market where AI hardware demand remains robust but regulatory risk is rising sharply.