Super Micro (SMCI) Shares Plunge 22% Following Co-Founder’s Arrest in $2.5B AI Chip Smuggling Case

Key Highlights

• Federal authorities indicted three individuals linked to Super Micro, including company co-founder Yih-Shyan “Wally” Liaw, for illegally exporting Nvidia-based AI servers to China
• The operation reportedly diverted at least $2.5 billion worth of advanced AI technology, with over $500 million shipped during a brief period in mid-2025
• Conspirators allegedly employed decoy servers and forged documentation to bypass both internal compliance measures and U.S. export enforcement officials
• Super Micro suspended two staff members and severed ties with a contractor following notification of the criminal charges
• Shares of SMCI plummeted by as much as 22% during after-hours trading once the sealed indictment became public

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Super Micro Computer (SMCI) experienced a dramatic decline in its stock price during after-hours trading Thursday following the unsealing of a federal indictment that accuses three individuals associated with the company of orchestrating a multibillion-dollar smuggling operation involving AI servers destined for China.

The criminal charges originated from the U.S. Attorney’s Office for the Southern District of New York. Those indicted include Yih-Shyan “Wally” Liaw, who co-founded Super Micro and currently serves on its board of directors; Ruei-Tsan “Steven” Chang, employed as a sales manager at the company’s Taiwan location; and Ting-Wei “Willy” Sun, who worked as an independent contractor.

Shares of SMCI declined by up to 22% in extended-hours trading immediately following the Manhattan federal court’s release of the indictment documents.

While the company itself was not charged, Super Micro confirmed it received notification from federal prosecutors Thursday and has been providing full cooperation to investigators. The firm promptly placed both Liaw and Chang on administrative leave while terminating its business arrangement with Sun.

The purported smuggling network operated through a Southeast Asian intermediary entity that served as a cover. This front company would receive the servers, submit fraudulent documentation indicating the hardware would remain within the region, then utilize a separate logistics provider to repackage the equipment in unmarked containers before routing them onward to China.

The scheme reportedly included using hair dryers to remove serial number stickers from genuine machines and affixing them to non-functional replicas — referred to in the indictment as “dummy” servers — which were strategically left at warehouse facilities to mislead investigators.

Prosecutors allege the defendants even deployed these decoy machines during an inspection conducted by a U.S. export control official.

Multi-Billion Dollar Diversion Scheme

The aggregate value of redirected technology since 2024 totaled approximately $2.5 billion. Between late April 2025 and mid-May 2025 alone, more than $510 million in server equipment was allegedly shipped to China.

Liaw, who holds approximately $464 million worth of Super Micro stock based on FactSet data, was taken into custody Thursday. Sun was also arrested. Chang remains at large.

According to prosecutors, Liaw actively advocated for upgrading the operation to incorporate more advanced hardware. Text message exchanges referenced in the indictment reveal him inquiring with a contact at the Southeast Asian intermediary about monthly capacity for Nvidia’s B200 chips — utilizing the Blackwell architecture — beginning in early 2025.

In another message, Liaw allegedly forwarded a hyperlink to a White House statement regarding forthcoming AI export regulations and recommended accelerating shipments before the policy became enforceable.

When a broker shared a link about Chinese citizens being arrested for AI chip smuggling activities, Liaw purportedly responded with crying face emojis.

Nvidia’s Statement

Nvidia, whose graphics processing units powered the servers central to this case, emphasized that export law adherence is among its highest priorities. The chipmaker stated it maintains close collaboration with customers and government entities on compliance initiatives.

While the indictment did not explicitly identify specific chip models, Nvidia commands the AI chip marketplace, and its products have been subject to rigorous U.S. export restrictions to China since 2022.

In 2024, Super Micro revealed that its auditor Ernst & Young had resigned from the engagement. The company subsequently engaged BDO as its replacement auditor. Chang, according to indictment documents, had arranged for what he described as a “friendly” auditor to examine data center facilities implicated in the operation.

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