Supermicro shares plummet 23%: co-founder arrested for smuggling Nvidia chips

Quotes of American Supermicro, one of the largest manufacturers of servers for neural networks, collapsed on the news of the detention of the company's co-founder on suspicion of organizing an illegal channel for supplying Nvidia AI chips to China. The arrest of the top executive dealt a serious blow to Supermicro, which is trying to regain investor confidence after a series of audit scandals that nearly sent it off the Nasdaq stock exchange.

Supermicro shares plummeted 23% in morning trading on March 20. The day before, FBI agents arrested 71-year-old co-founder Yi-Shian "Wally" Liao on charges of violating U.S. export control laws and conspiracy to smuggle goods. Quotes of Supermicro began to collapse immediately after the publication of the statement of the U.S. Department of Justice about the criminal prosecution, on Friday, the decline intensified.

According to an indictment unsealed in a Manhattan court, Supermicro Taiwan general manager Rui-Tsang "Steven" Chan, a fugitive from justice, and middleman Tin-Wei "Willie" Sun, who was taken into custody, are also defendants in the case. According to Fortune, each of the three defendants faces up to 20 years in prison.

According to the U.S. Department of Justice, in 2024-2025, the founder and general manager organized illegal shipments of servers to China. A firm in Southeast Asia was used as a "conduit" that purchased equipment from Supermicro, ostensibly for its own needs. Servers assembled in the U.S. were shipped to Supermicro's Taiwanese subsidiary, and from there to Southeast Asia, where the equipment was put into unmarked boxes for secret delivery to customers in China. As part of this increasingly "brazen" scheme, Supermicro shipped $2.5 billion worth of servers with Nvidia chips installed in them as the primary target of buyers, the DOJ alleges.

Both companies were quick to distance themselves from the scandal. Supermicro said that it was "not named as a defendant in the indictment," suspected top managers have been suspended, and relations with the middleman have been severed. Nvidia said that "strict compliance" is a "top priority" for the company and that "illegally diverting controlled U.S. computers to China is a knowingly losing cause on all fronts," the Financial Times reported.

Trading in Supermicro shares was suspended in 2018 due to an investigation by the U.S. Securities and Exchange Commission (SEC) into the company's accounting practices. After that, Yi-Shian Liao had to resign from all his positions. He was able to return to the board of directors only after five years. A new blow to Supermicro's reputation was dealt in August 2024 when short-seller Hindenburg Research accused the company of returning to questionable accounting practices. Almost simultaneously, auditor Ernst & Young (EY) raised concerns about transparency and corporate governance, forcing Supermicro's board to launch an independent investigation.

In October 2024, in the midst of the audit, EY abruptly resigned as auditor, stating that it could no longer "rely on the representations of management" of Supermicro and "did not wish to be associated" with its reporting. As a result, the company missed the deadline for filing its annual and quarterly reports, again facing the threat of delisting from Nasdaq. However, days before the deadline, it hired a new auditor and remained on the exchange. In December 2024, a special committee investigating EY's allegations, which consisted of just one member of Supermicro's board of directors, concluded that there was no evidence of fraud.

This article was AI-translated and verified by a human editor