Key Takeaways
- Super Micro shares fell about 12% after Bloomberg reported Manhattan prosecutors are examining whether entities tied to Alice Huang smuggled its servers into China.
- The drop came nine days after a record quarter in which revenue jumped 298% to $19.9 billion and full-year guidance rose to $72 billion to $82 billion.
- Gross margin slid to 12.7% from 17.5% in the June quarter, and operations used $434 million of cash as inventory hit $15.1 billion.
- The fiscal second-quarter report, expected in early February, must land inside the $19.5 billion to $21.5 billion guidance range without new legal disclosures.
Super Micro Computer (SMCI) shares fell about 12% on Thursday after Bloomberg reported that Manhattan prosecutors are examining whether entities tied to Alice Huang helped smuggle its servers into China.
The timing stings. Just nine days earlier, Super Micro posted record quarterly revenue of $19.9 billion and raised its full year outlook.
Super Micro builds its AI racks around Nvidia (NVDA) GPUs, and those chips are exactly what U.S. export controls target. Alice Huang is also the businesswoman at the center of a separate scandal involving Nvidia’s leadership.
Meanwhile, rival Dell Technologies (DELL) exited its latest quarter with a record $95 billion AI server backlog. So customers have a large alternative if compliance worries spread.
A second inquiry widens the probe
Bloomberg’s report said the U.S. attorney’s office in Manhattan is leading the inquiry. Prosecutors are also looking at Megaspeed International, Alice Huang’s former company, which has denied wrongdoing.
This builds on a case that has shadowed the stock since March:
- Prosecutors charged co-founder Wally Liaw and two others over an alleged scheme to divert about $2.5 billion of Nvidia-powered servers to China.
- Liaw pleaded not guilty and left the board, and Super Micro was not named as a defendant.
- In August, a board-led review found no evidence that current senior management knew of the alleged scheme.
So the company still faces no charges. Yet a second inquiry suggests the export story is widening, and investors have little patience for open-ended legal risk…
Legal headlines have repeatedly overpowered strong results this year, and Thursday followed the same script.
The record quarter got buried
Super Micro’s fiscal first quarter, which ended September 30, was its biggest ever.
Revenue jumped 298% year over year to $19.9 billion, well above the $16.39 billion analysts expected. Adjusted EPS of $1.81 beat the $1.23 consensus, while net income climbed to $1.59 billion from $168 million.
How sharp was the step up?
Even sequential growth reached 79%, from $11.1 billion in the June quarter.
Management also guided fiscal second quarter revenue to $19.5 billion to $21.5 billion, above the $17.14 billion Wall Street expected. It lifted the fiscal 2027 range to $72 billion to $82 billion, up from $65 billion to $72 billion.
CEO Charles Liang said the company’s shift toward full data center solutions “continues to accelerate.”
That pace outruns Dell, whose AI server revenue doubled to $16.4 billion in the quarter ended July 31.
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Thin margins, heavy inventory
The harder question is what all that revenue earns. Gross margin was 12.7%, up from 9.3% a year ago but down sharply from 17.5% in the June quarter.
Operating margin came in around 10.4%. Dell’s server segment, by contrast, earned 15.0% despite a heavy AI mix.
Dell credits disciplined pricing for its gains, and that is the gap Super Micro has to close.
Cash is the other strain. Operations used $434 million as receivables rose to $9.7 billion and inventory hit $15.1 billion. Super Micro ended with $6.9 billion of cash against $8.6 billion of bank debt and convertible notes.
My take: The business is clearly executing, and Thursday’s drop prices in a worst case that prosecutors have not described. Still, Super Micro has spent most of 2026 answering export questions, and every new headline tests customer and regulator patience. I would want margins holding above 12% and clarity from prosecutors before treating the discount as a bargain.
The next checkpoint is the fiscal second quarter report, expected in early February. It needs revenue inside the $19.5 billion to $21.5 billion range, steady margins, and no new legal disclosures.
So what is Super Micro stock actually worth?
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