- An analyst said that about $510 million in Nvidia-powered AI server shipments tied to China demand, roughly 10% of quarterly revenue, failed to improve gross margins, which were already declining.
- A U.S. indictment alleged a Super Micro co-founder and others illegally diverted Nvidia AI servers to China through a Southeast Asian intermediary, violating export controls.
- Argus Research downgraded SMCI to 'Hold,' warning the charges could weigh on sentiment and “reawaken echoes” of past compliance and listing concerns.
Shares of Super Micro Computer Inc. (SMCI) fell over 5% in premarket trading on Monday after an analyst said Nvidia-powered AI server shipments tied to China demand failed to reverse the company’s declining gross-margin trend despite accounting for roughly 10% of quarterly revenue.
SMCI stock fell 33% on Friday and erased more than $6 billion in market value, marking the company’s worst session since October 2018.
Analyst Says China Servers Didn’t Lift SMCI Margins
Taiwanese analyst Ming-Chi Kuo said on X that servers worth about $510 million, shipped between late April and mid-May 2025 and linked to routes supplying China-related demand, did not offset SMCI’s decline in gross margins.
“At least ~10% of Super Micro’s 2Q CY2025 revenue was tied to servers reportedly smuggled into China. In theory, these should carry much higher margins, but gross margin still declined sharply to 9.6%,” Kuo said.
“Smuggling AI servers into China didn’t change the downward trend in Super Micro’s gross margin,” the analyst said, adding that the result points to two possible explanations. First, margins in the company’s core business may simply be weaker than expected. Kuo said that AI server assembly margins are structurally under pressure, with Super Micro’s smaller scale and execution disadvantages amplifying the impact.
Second, the analyst said Super Micro was likely not the only supplier participating in shipments serving China's demand, which may have increased buyer leverage and reduced pricing power on those transactions.
US Case Flags Nvidia Server Diversion To China
The analyst’s comments follow a U.S. indictment alleging that a Super Micro co-founder and others illegally diverted Nvidia Corporation-powered AI servers to China through a Southeast Asian intermediary in violation of export controls. The case marks one of the highest-profile enforcement actions tied to the alleged diversion of advanced AI infrastructure to China as Washington tightens oversight of export-control compliance.
Super Micro Computer said the individuals’ alleged conduct violated company policies and that it is cooperating with authorities after placing the executives involved on administrative leave and ending its relationship with an outside contractor named in the case.
Separately, board member Yih-Shyan Wally Liaw resigned following the charges, while DeAnna Luna was elevated to chief compliance officer. Luna previously held trade and sanctions compliance roles at Intel and Teledyne.
Argus Says Charges ‘Reawaken Echoes’ At SMCI
The developments prompted Argus Research to downgrade Super Micro to ‘Hold’ from ‘Buy,’ saying the charges “reawaken echoes” of past issues tied to revenue delivery, margin shortfalls and a previous near-delisting episode on Nasdaq.
The brokerage said the allegations could overshadow otherwise strong second-quarter results and fiscal-year guidance and warned that the stock may not trade primarily on fundamentals in the intermediate term despite strong generative-AI demand supporting the company’s advanced server platforms.
How Did Stocktwits Users React?
On Stocktwits, retail sentiment for SMCI shifted to ‘extremely bullish’ from ‘bearish’ levels over the past week, amid an over 1,500% surge in message volume during the same period.
One user said, “Only way this recovers they get rid of the entire board or a takeover. Not being a bear being real. Then you will get your recovery to $50.”
Another user said, “I’m buying the company still has good revenue and assets and it wasn’t the company’s fault. It was the individual I’m buying.”
SMCI stock has shed nearly half of its value over the past year and declined about 30% since January.
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