SMCI, Co-founder's Nvidia Chip Scandal: 28% Drop

BREAKING NEWS
Super Micro Computer (SMCI) is down 27% Friday after news broke that one of the AI hardware company’s co-founders, Yih-Shyan "Wally" Liaw, and two others had been arrested for allegedly "conspiring to sell billions of dollars’ worth of AI tech to China."
These components, assembled in the U.S., reportedly contained servers with Nvidia AI chips to be sold to buyers by "faking documents and using dummy equipment to slip past audits," according to the Department of Justice. Several of the workers of this scheme even used hair dryers to remove and reapply serial-number labels on servers, per media reports.
SMCI and Nvidia have a decade-long partnership. SMCI CEO Charles Liang touted the relationship at last year’s Nvidia GTC, saying the two companies have an “unparalleled ability and capacity to deliver first-to-market solutions that are developed, constructed, validated (and manufactured) for American federal customers.”
Liang released a carefully worded statement on Friday, saying that the company isn’t named as a defendant, and alluded that the escapade violated internal compliance protocols. In other words, the company is distancing itself and shifting the blame to Liaw, and the other two involved: Ruei-Tsang "Steven" Chang, a sales manager in Taiwan; and Ting-Wei "Willy" Sun, a contractor.
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"Unlawful diversion of controlled US computers to China is a losing proposition across the board," an Nvidia spokesperson said. “Nvidia does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective.”
Nvidia’s stock fell about 1.5% on Friday.
There’s a dark irony here when you consider that the U.S. now allows Nvidia to export some advanced chips to “approved customers” in China. Either Liaw didn’t get the memo, he and his counterparts were shipping something better, or he was trying to get the chips to customers not on the U.S.’s approved list.
And for SMCI, this isn’t their first time tangling with the law. The company was charged by the SEC in 2020 for accounting violations, and was the subject of a short seller’s report in 2024.
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