Super Micro Computer Faces Setbacks as NVIDIA Shifts Orders Amid Legal Troubles

Super Micro Computer (SMCI) is grappling with mounting issues, including legal troubles and lost orders from NVIDIA, which has reportedly redirected its business to more stable suppliers. Allegations of financial misconduct, a DOJ probe, and halted expansions are complicating the company's recovery efforts.

NVIDIA Shifts Orders Away from Super Micro as Legal Issues and Expansion Halt Mount

SMCI, a prominent supplier of high-performance servers and liquid-cooled AI racks, faces mounting challenges as legal issues escalate and key clients pull back from existing contracts. In early November, Wccftech reported allegations that NVIDIA, a significant client, had begun redirecting orders away from SMCI to more stable suppliers. This would mark a pivotal shift if confirmed, as Super Micro was one of NVIDIA's top three suppliers until recently.

Alongside NVIDIA’s possible order redirection, Super Micro Computer’s reputation among its major clients is under strain, mainly due to allegations of financial misconduct, a preliminary Department of Justice (DOJ) investigation, the recent departure of its second auditor within 18 months, and the threat of a Nasdaq delisting.

Adding to these complications, a Taiwanese daily reported that Super Micro Computer recently suspended the planned expansion of its Malaysian production facility, a project set to double output to 10,000 server cabinets monthly. This halt has disrupted the strategic plans of YTL Group, one of Super Micro’s largest clients, which intended to use NVIDIA’s DGX GB200 NVL72 full cabinet AI servers from SMCI to construct a large-scale AI data center on YTL’s 1,640-acre campus in Johor, Malaysia. YTL has reportedly shifted its orders from Super Micro to Taiwan’s Wistron Group, specifically to its Weiying facility in Malaysia.

Super Micro Faces Scrutiny and Supply Shortages as DOJ Investigates Financial Practices

Amid these setbacks, Super Micro’s CEO, Charles Liang, admitted that the company has been persistently requesting new supplies of NVIDIA’s Blackwell chips, but their availability remains limited. This scarcity complicates Super Micro’s capacity to meet its customers' demands.

The company’s troubles began in August when Hindenburg Research published a report accusing Super Micro of questionable practices, including alleged channel stuffing, incomplete shipments, and the rehiring of former executives previously implicated in accounting violations. These violations led to a $17.5 million settlement with the Securities and Exchange Commission (SEC). The report also alleged that a significant portion of SMCI's sales stemmed from non-arm's-length transactions with suppliers such as Ablecom and Compuware. These claims have reportedly sparked interest from the DOJ in a preliminary investigation.

Following the Hindenburg report, Super Micro Computer postponed its annual report filing, placing it at risk of delisting for non-compliance with Nasdaq’s reporting deadlines. The company now faces a November 16 deadline to submit the report or present a compliance plan to Nasdaq, aiming to avoid delisting and regain stability amid intensifying scrutiny.