Super Micro co-founder arrested in $2.5B Nvidia AI chip smuggling case tied to China

Federal prosecutors have charged a co-founder of Super Micro Computer in a case that cuts to the heart of the global AI arms race.

The U.S. Department of Justice on Thursday unsealed an indictment accusing Yih-Shyan “Wally” Liaw and two others of orchestrating a scheme to move billions of dollars’ worth of advanced U.S. AI technology to China, sidestepping export restrictions meant to protect national security. Liaw, a U.S. citizen, and Ting-Wei “Willy” Sun were arrested and are expected to appear in federal court in California. A third defendant, Ruei-Tsang “Steven” Chang, remains at large.

At the center of the case are high-performance servers built in the United States and equipped with Nvidia graphics processing units—chips that have become the backbone of modern artificial intelligence systems. Prosecutors allege the group used shell transactions, falsified paperwork, and staged shipments to conceal the hardware’s true destination.

“The indictment unsealed today details alleged efforts to evade U.S. export laws through false documents, staged dummy servers to mislead inspectors, and convoluted transshipment schemes, in order to obfuscate the true destination of restricted AI technology—China,” said John A. Eisenberg, Assistant Attorney General for National Security. “These chips are the product of American ingenuity, and NSD will continue to enforce our export-control laws to protect that advantage.”

Investigators say the operation routed servers through Taiwan and parts of Southeast Asia, where they were repackaged and sent on to China. The Justice Department claims at least $2.5 billion in AI-related hardware was moved through the network, including more than $500 million in shipments over a short stretch between April and mid-May 2025.

“The FBI’s investigation revealed that Liaw, Chang, and Sun allegedly conspired to sell billions of dollars’ worth of servers integrating sensitive, controlled graphic processing units to buyers in China, in violation of U.S. export control laws,” said Assistant Director Roman Rozhavsky of the FBI’s Counterintelligence and Espionage Division.

He added: “Controlling the export of sensitive U.S. artificial intelligence technology is essential to safeguarding our national security and defending the homeland. That’s why combating export violations is among the FBI’s highest priorities, and we will continue working with our law enforcement, private sector, and international partners to bring to justice all who take action to undermine U.S. national security.”

The charges sent shockwaves through the market. Super Micro shares dropped 27% in early trading Friday, a slide that could wipe out nearly $5 billion in market value if losses hold. The company, a key supplier of AI servers built around Nvidia chips, said it was not named as a defendant and has cooperated with investigators. It has placed the employees involved on leave and cut ties with the contractor named in the case, Reuters reported.

The fallout could stretch beyond the company itself. Analysts at Bernstein warned the allegations raise “serious credibility issues” and could strain relationships with critical partners. Nvidia’s position looms large, as any move to distance itself from Super Micro could disrupt the flow of GPUs that power the company’s core business.

The case lands at a moment when Washington has tightened controls on advanced semiconductors, aiming to slow China’s progress in AI and prevent military applications of U.S.-developed technology. Restrictions introduced in 2022 already limit the export of chips such as Nvidia’s A100 and H100, both of which are widely used in training large-scale AI models.

Super Micro rode the surge in demand for AI infrastructure to a peak valuation of $67 billion in 2024. That run has since cooled, pressured by tighter margins and scrutiny following allegations raised by short seller Hindenburg, which has since disbanded. The latest charges add a new layer of uncertainty at a time when the company’s role in the AI supply chain remains under close watch.

For prosecutors, the message is clear: the fight over AI dominance is no longer confined to labs and data centers. It is now a matter of enforcement, with real-world consequences for companies and executives operating at the center of the industry.