Super Micro Computer (NASDAQ: SMCI) stock is getting pummeled in Friday’s trading following news that seriously threatens the company’s outlook. The server specialist’s share price was down 28.2% as of 1:05 p.m. ET and had been down as much as 29% earlier in the session.
The stock market is seeing broad bearish momentum today as investors weigh risks connected to the war with Iran and inflation, but Supermicro’s sell-off is primarily being driven by some concerning business-specific news. The U.S. Justice Department announced yesterday that it had charged three people connected to the company with aiding in the illegal smuggling of U.S.-originated artificial intelligence (AI) technologies to China.
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Supermicro builds servers using advanced AI processors from Nvidia, and these advanced chips were barred from being exported to China. The Justice Department is alleging that Yih-Shyan Liaw, Ruei-Tsan Chang, and Ting-Wei Sun conspired and took steps to aid the sale of $2.5 billion worth of banned AI chips to China in violation of the Export Control Reform Act. Liaw served on Supermicro’s board of directors and cofounded the company in 1993, Chang was a sales manager, and Sun worked as a contractor for the company.
The Justice Department has not charged Supermicro directly, but it’s possible that the scope of its investigations and legal initiatives could be expanded. On the heels of the Justice Department’s export case, there is a risk that Nvidia could stop selling its chips to Supermicro. While it’s unclear if such a scenario will actually pan out, it would be disastrous if the server specialist if it were to occur. Given the risks surrounding the company right now, the stock is likely to continue seeing choppy trading until there’s greater visibility surrounding the export issues.
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