Supermicro Soars Thanks to $4 Trillion Nvidia, Giving CEO Jensen Huang Freedom
Nvidia’s CEO, Jensen Huang, and Supermicro’s co-founder, Charles Liang, have had a long-standing partnership that has fueled both companies’ growth. This alliance came into focus recently during Huang’s keynote address at an event in Taiwan in 2024. Together, the two executives celebrated their collaboration while showcasing innovative server technologies. However, recent events have raised concerns about the future of their relationship.
Supermicro Faces Legal Challenges
A significant scandal erupted in March 2024 when Yih-Shyan “Wally” Liaw, Supermicro’s co-founder, was arrested on federal charges. Authorities accused him of smuggling Nvidia-powered servers worth $2.5 billion to China between 2024 and 2025. Liaw has pleaded not guilty and was released on a $5 million bond. Nvidia and Supermicro have not been implicated in the case, and Liang has stated that Supermicro is a victim in this situation.
Impact on Business Relations
This controversy poses a risk to Supermicro, which derives approximately 71% of its revenue from products that incorporate Nvidia’s GPU technology. Analysts have noted that the credibility of Supermicro has been compromised due to Liaw’s arrest, leading to speculation about Nvidia potentially distancing itself from the company. If this occurred, the impact could be detrimental.
- 71% of Supermicro’s revenue comes from Nvidia products.
- 39% increase in GPU reliance from fiscal 2024 to 2025.
Supermicro’s financial growth has been impressive; between fiscal 2023 and fiscal 2025, sales surged from $7.1 billion to $22 billion, largely fueled by the AI boom initiated by ChatGPT’s launch. The company’s stock reached $1,000 per share in March 2024, reflecting a market capitalization of $67 billion.
Historical Context of Nvidia and Supermicro’s Partnership
Founded in 1993 in Silicon Valley, Nvidia and Supermicro have collaborated since nearly their inception. Their partnership was formalized further in 2007 when Supermicro went public. Nvidia selected Supermicro as its primary go-to-market partner for its initial data center GPU, enhancing their competitive edge.
Market Dynamics and Strategic Dependencies
In recent years, Supermicro’s dependence on Nvidia has intensified, particularly for GPU chips essential for AI applications. Currently, one unnamed supplier, widely recognized as Nvidia, accounts for a significant portion of Supermicro’s component spending. This dependency raises questions about sustainability, especially considering that Supermicro lacks long-term supply contracts with Nvidia.
- 30.7% of component spending in FY2023 attributed to Nvidia.
- 64.4% increase projected by FY2025.
The Fallout from Liaw’s Arrest
Supermicro’s stock fell 33% following the news of Liaw’s indictment but has partially recovered after his resignation from the board. Additionally, proxy advisory firm ISS criticized Supermicro’s governance, specifically targeting Liang’s leadership. Concerns about compliance and oversight are now at the forefront, particularly after Supermicro’s history of regulatory issues.
For the time being, Nvidia has not indicated any plans to sever ties with Supermicro. Nevertheless, the partnership’s future may heavily depend on the resolution of the legal issues surrounding Liaw and the company’s governance practices moving forward.
Conclusion
The intertwined operations of Nvidia and Supermicro present both opportunities and vulnerabilities amidst an evolving technological landscape. Stakeholders are closely monitoring how the companies manage this crisis and whether their long-standing collaboration can endure through these challenges.
