How a $2.5 Billion GPU Smuggling Ring Crashed SMCI and Nvidia (NVDA) Stocks

The U.S. Department of Justice unsealed an indictment charging Super Micro Computer (SMCI) co-founder Yih-Shyan “Wally” Liaw and two associates with smuggling $2.5 billion in Nvidia (NVDA) AI servers to China.

SMCI shares plunged 28% while Nvidia fell 4.8% as the highest-profile U.S. AI chip export enforcement case rattled markets.

How the Alleged Scheme Worked

According to the DOJ, Liaw used an unnamed Southeast Asian shell company as a fake end user.

The company reportedly placed massive orders for SMCI servers equipped with restricted Nvidia GPUs, including B200 and H200 series chips, which have been banned for export to China since 2022.

Servers assembled in the U.S. were routed through SMCI’s Taiwan facilities, delivered to the shell company, then repackaged in unmarked boxes and shipped to Chinese buyers. The operation moved $510 million in just three weeks during spring 2025.

Both NVDA stock and SCMI fell in the aftermath.

Nvidia (NVDA) Stock Performance. Source: TradingView

Surveillance footage from December 2025 captured one defendant using a hair dryer to peel and swap serial number stickers between real servers and non-working dummies.

During compliance audits, the group staged thousands of fake replica servers in warehouses to deceive inspectors.

“These chips are the product of American ingenuity, and NSD will continue to enforce our export-control laws to protect that advantage,” said John A. Eisenberg, Assistant Attorney General for National Security.

Market Fallout and What Comes Next

Liaw, 71, holds approximately $464 million in SMCI stock. He faces up to 30 years in federal prison across three conspiracy counts.

Co-defendant Ruei-Tsang “Steven” Chang, SMCI’s Taiwan sales manager, remains a fugitive.

SMCI placed Liaw and Chang on administrative leave and stated the alleged conduct “is a contravention of the Company’s policies.”

The company itself is not named as a defendant and says it is cooperating with authorities.

The case now sits with Judge Edgardo Ramos in the Southern District of New York.

Whether prosecutors pursue additional charges against SMCI as an entity, or whether Nvidia faces further supply chain scrutiny, will shape AI chip policy debates for months.

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