Super Micro shares plunge 29% as co-founder is charged in $2.5 billion Nvidia chips smuggling ring

Shares of Super Micro Computer (SMCI) plummeted more than 29% on Friday, wiping out nearly $5 billion in market value, after federal prosecutors unsealed a criminal indictment against the company’s co-founder and two others. The charges allege a massive, multi-year conspiracy to smuggle restricted Nvidia AI chips to China using "dummy servers" and literal hair dryers to bypass U.S. export controls.

The indictment, unsealed in Manhattan by U.S. Attorney Jay Clayton, names Yih-Shyan “Wally” Liaw - a co-founder, board member, and Senior VP - as a central figure in the scheme. Also charged are Ruei-Tsan “Steven” Chang, a sales manager in Taiwan, and Ting-Wei “Willy” Sun, a third-party contractor described as a "fixer."

The "hair dryer" heist: How the scheme worked

According to the Department of Justice, the trio orchestrated the diversion of approximately $2.5 billion worth of high-performance servers to Chinese buyers between 2024 and 2025. To evade detection by both U.S. inspectors and Super Micro's own compliance team, the defendants allegedly used a "pass-through" company in Southeast Asia to stage elaborate deceptions.

In a detail that has stunned the tech industry, surveillance footage reportedly captured workers using hair dryers to carefully peel serial number stickers and labels off genuine, GPU-packed servers. These labels were then affixed to "dummy" server shells, non-working replicas, which were left in warehouses for inspectors to find.

The real hardware, including coveted Nvidia H100 and B200 chips, was then repackaged in unmarked boxes and forwarded to China.

Corporate fallout and market reaction

Super Micro, which accounts for roughly 9% of Nvidia’s revenue, saw its stock price fall to a low of $20.53, a staggering 82% decline from its 2024 record highs. The collapse reflects deep investor anxiety over the company’s internal controls and its future relationship with Nvidia.

"We wonder if Nvidia might feel the need to further distance themselves from SMCI," analysts noted, warning that a loss of GPU supply would be "devastating" for the firm.

In response to the charges, Super Micro stated it is not named as a defendant and is cooperating fully with the investigation. The company has placed Liaw and Chang on administrative leave and terminated its relationship with Sun.

Liaw, who is a U.S. citizen, was arrested on Thursday and resigned from the board, effective immediately. Chang remains a fugitive.

The case marks the largest chip-smuggling prosecution since the U.S. imposed strict AI export restrictions in 2022. If convicted, the defendants face up to 30 years in prison.