00:00This is an accusation that is aimed at the co-founder of the business, who co-founded Supermicro back in
00:051993.
00:06He's been on the board of the company, but as well as another executive based in Taiwan, as well as
00:10a contractor,
00:11that basically they were making up to $2.5 billion worth of sales of servers stuffed full of H200s, B200,
00:18NVIDIA chips,
00:18and not actually selling them to a Southeast Asian company, Company One as it's named,
00:23but in fact it was going to there and then on to a Chinese end demand.
00:27And the moment we're waiting to hear back from those that are charged,
00:31but the charges really are that they were avoiding these export controls,
00:35that there was conspiracy in some way to be, well, smuggling goods from the U.S. as well as defrauding
00:41the U.S.
00:41This could be 20 years plus five years plus five years if they are indeed convicted.
00:45And we've seen other arrests happen, but all of this is because since 2022 you haven't been able to ship
00:49cleanly NVIDIA chips over to China.
00:51You've got to be getting some more export licenses and controls have been put in place to stop exactly this.
00:57And then we even have documentation that's, of course, there's the accusation that they were making up documents
01:02to really put all the wool over the eyes of their own compliance department.
01:06And that's why it's notable that a lot of the analysts here are saying,
01:09look, the actual defendant is not the company.
01:12But what does this mean in terms of NVIDIA wanting to do business with this company long term?
01:17How much does it once again just implicate and skirmish the name of Supermicro,
01:22which I might add has already had plenty of business issues already?
01:25I was just going to say, I mean, this is the same company that had accounting problems, right?
01:28And had its auditor say, you know what?
01:31I quit.
01:31We quit.
01:32We don't want to have anything to do with these books.
01:34And for months they couldn't even find another company that would agree to audit their books.
01:40Like, this can't be a surprise.
01:42I think maybe if you're a long-term holder of Supermicro, you're up for a bit of volatility.
01:46And, like, at that point the shares dropped 60%.
01:47Today, Matt, they could fall off a cliff by a quarter of their entire market cap.
01:51That's, what, $4 billion of about an $18 billion company.
01:55You're used to perhaps this company sailing close to the winds.
01:58But never have we seen such a clear and evident accusation and charge of companies trying to get around
02:05what is the United States' focus on national security, on stopping NVIDIA chips getting into Chinese hands,
02:11and the AI issues that come into play with that.
02:13Really, this is at the moment an allegation.
02:15And we know that one still remains on the run.
02:17He's the Taiwanese executive for Supermicro.
02:21But the contractor and, indeed, the co-founder have been brought to bear, have been charged.
02:25I want to see how this court continues.
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