The ongoing scandal involving SuperMicro Computer Inc. (NASDAQ:SMCI) poses a significant challenge to its longstanding partnership with Nvidia (NASDAQ:NVDA), but the impact may not be too harsh, says one expert.

Sachin Ohal, CTO at International Systems Technologies, told Fortune that Nvidia's reputation won't affect chip sales, and Supermicro customers' vendor choices are separate from the ongoing smuggling allegations.

Customers leaving Supermicro face a 3–6 month transition involving board-level vendor reviews, cybersecurity and data center assessments, brand risk analysis, and account management, with funding required for a qualified replacement vendor, Ohal said.

Supermicro's close-knit network of related companies, led by CEO Charles Liang's brothers, gives it a competitive edge by enabling rapid adaptation to regulatory or tech changes.

This embedded structure allows Supermicro to handle critical hardware infrastructure, like chassis and power distribution, so partners like Nvidia can focus on software and chips, making the company highly responsive and indispensable in the data center ecosystem.

"The business reality is that it is not easy to decouple or just leave," Ohal said. 

Nvidia and SuperMicro did not immediately respond to Benzinga’s request for comment.

The Smuggling Scandal

This scandal involves Super Micro's co-founder, Yih-Shyan "Wally" Liaw, senior vice president of business development, alongside general manager Ruei-Tsan "Steven" Chang and contractor Ting-Wei "Willy" Sun, who were indicted for allegedly smuggling Nvidia chips to China. They used a Southeast Asian company as a middleman and deployed "dummy" servers to deceive Super Micro's compliance team. This incident had already battered Supermicro’s stock and reputation.

Liaw pleaded not guilty and was released on a $5 million bond. CEO Charles Liang distanced himself from the actions of these individuals and labeled Supermicro as a “victim” that was misled by deceptive schemes targeting both federal authorities and the company's compliance team.

Supermicro’s Dependence On Nvidia GPUs

The Supermicro–Nvidia partnership began early, strengthening after Supermicro's 2007 IPO when Nvidia chose it as its first data center GPU go-to-market partner, collaborating on system configuration and testing for customer-ready products.

The hardware manufacturer depends on Nvidia GPUs for about 71% of its revenue. However, Supermicro does not have a long-term supply contract with Nvidia, making the company susceptible to any changes in the partnership.

At the same time, Supermicro is estimated to have contributed $12–$13 billion of Nvidia's $130 billion revenue last year, as per Fortune, though Nvidia doesn't disclose customer-specific figures.

Bernstein analysts say that the scandal has led to “serious credibility issues” for Supermicro. The potential loss of Nvidia’s GPUs could have a “devastating impact” on Supermicro’s business. Meanwhile, Mehdi Hosseini, a senior tech analyst at Susquehanna, has called for the removal of Liang and the entire Supermicro board.

Benzinga's Edge Rankings place SMCI in the 98th percentile for quality and the 88th percentile for value, reflecting its strong performance in both areas. Benzinga’s screener allows you to compare SMCI’s performance with its peers.

Price Action: On a year-to-date basis, SMCI stock plunged 25%, while Nvidia fell 6.07%, as per data from Benzinga Pro.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.

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