Super Micro Computer shares fell more than 25% in premarket trading on Friday following federal charges against cofounder Yih-Shyan Liaw.
The Department of Justice alleged that Liaw and two associates conspired to smuggle advanced AI servers to China in violation of export laws.
The indictment was released on Thursday while the company was not formally named as a defendant in the criminal filing.
This development marks a significant escalation in US efforts to control semiconductor exports to rival nations.
Prosecutors state that the defendants utilized a pass-through company to obscure the actual China-based end customers for the high-value hardware.
Between 2024 and 2025, this entity purchased roughly 2.5 billion dollars in servers from Super Micro Computer according to court documents.
More than 510 million dollars of US-assembled units were diverted between late April and mid-May 2025 alone.
Authorities claim the pass-through company made orders appear legitimate to hide the true destination.
In a statement released Thursday, Super Micro Computer confirmed that Liaw and the other accused worker have been placed on administrative leave immediately.
The firm reported that it has severed ties with the contractor involved in the alleged scheme to distance itself from the misconduct.
Executives noted the company is cooperating fully with the government’s investigation and will continue to do so without delay.
Company leaders emphasized they take these regulatory obligations with the utmost seriousness.
Nvidia addressed the situation in a release emphasizing that strict compliance with export regulations remains a top priority for the chipmaker.
The company stated it does not provide service or support for systems diverted illegally to China markets under any circumstances.
Nvidia noted Super Micro accounts for roughly 9% of its total revenue according to Bloomberg data.
This relationship underscores the interconnected risks facing major semiconductor suppliers.
The core violation involves Super Micro’s flagship products which integrate Nvidia GPUs subject to strict US export controls established since 2022.
These regulations prevent the sale of advanced AI chips to China without a specific federal license from Washington authorities.
The indictment suggests the defendants bypassed these licensing requirements through deceptive commercial practices involving shell entities.
Compliance failures in this sector carry severe financial and legal penalties for all parties.
This case highlights the intensifying scrutiny on the US technology supply chain amid ongoing geopolitical tensions with Beijing and Washington.
Previous enforcement actions have targeted similar efforts to circumvent semiconductor restrictions designed to limit China’s military modernization capabilities.
Analysts suggest this charge could impact how foreign buyers view US server manufacturers in the current climate.
Security concerns continue to drive policy decisions regarding high-tech trade across the Pacific.
Market volatility remains a significant concern as investors weigh potential legal liabilities against the company’s strong position in the AI infrastructure sector.
The stock plunge reflects broader anxieties regarding regulatory risks within the technology hardware industry during this period of rapid expansion.
Traders are closely monitoring the Department of Justice proceedings for further updates on the case details.
Financial markets often react sharply to accusations of export control violations in sensitive industries.
Legal experts anticipate the outcome of this investigation could set precedents for how technology firms structure their international sales channels.
Investors will likely watch quarterly earnings reports for financial impacts stemming from lost contracts or potential fines.
The situation underscores the complexities of global trade restrictions in the current artificial intelligence boom.
Future rulings may influence how other companies navigate cross-border data and hardware transfers.
