Super Micro Computer, Inc. (NASDAQ:SMCI) saw its shares give up early gains on Thursday, July 2, 2026, as a relief rally tied to an ongoing Taiwan investigation quickly reversed, wiping out approximately $1.61 billion in market value during the session. The AI server stock slipped 2.8% to $26.87 in the latest available quote before the market close, after earlier reaching a high of $29.20.
The stock had opened higher on optimism following a letter from Chief Revenue Officer Matt Thauberger to customers, stating that the company is "not a target of this investigation." However, the rally faded as the session progressed, and shares fell below the previous close. The intraday swing from the high of $29.20 to the latest price of $26.87 represents a drop of 8.0% from the day's peak. Based on Supermicro's diluted share count of 692.189 million shares, the value lost from the high to the close amounts to about $1.61 billion, which is more than triple the company's net income of $483 million in the fiscal third quarter.
Thauberger's July 1 letter to customers disclosed that authorities had questioned four Supermicro Taiwan staff members on Monday regarding sales to a Taiwanese tech firm. According to the letter, two employees were held for a hearing, while two others posted bail. Thauberger reiterated the company's "zero tolerance" for violations and assured customers that the situation had "absolutely no impact" on service. The investigation, led by the Keelung District Prosecutors' Office, focuses on suspected illegal exports of AI servers containing NVIDIA Corp. (NASDAQ:NVDA) chips to China, in violation of U.S. export restrictions. This follows a May operation in which officials seized 50 servers and detained three individuals, as reported by Reuters.
The regulatory overhang is not new to this week. In March, Supermicro disclosed that the U.S. Attorney's Office for the Southern District of New York had unsealed charges against three individuals tied to the company for alleged export-control violations. Supermicro stated at the time that it was not named as a defendant and was cooperating with authorities.
Supermicro's market capitalization currently stands at $18.6 billion, which is approximately 0.47 times the midpoint of its projected fiscal 2026 sales range of $38.9 billion to $40.4 billion. This low sales multiple reflects investor concerns about control risk and the company's ability to navigate regulatory challenges. The company's fiscal third-quarter net sales were $10.2 billion, down from $12.7 billion in the second quarter but up significantly from $4.6 billion a year earlier. However, gross margin remains thin at 9.9%, and cash flow from operations was negative $6.6 billion, indicating heavy investment that is draining cash. The company's debt and convertible notes stand at $1.3 billion and $8.8 billion, respectively, making debt a growing concern if the stock continues to fall.
CEO Charles Liang has spoken about "margin recovery" in the May quarter, but the market remains cautious. Investors are not just buying into AI server growth; they want to see if orders, cash flow, and export controls can work in harmony. The stock's performance reflects this uncertainty, as it trades below half the midpoint of its sales forecast.
Other AI-related stocks also felt the pressure. NVIDIA Corp. (NASDAQ:NVDA) fell 2.2% to $193.29, while Dell Technologies Inc. (NYSE:DELL) lost 8.3% to $389.79. The Invesco QQQ Trust (NASDAQ:QQQ) declined 1.9% to $711.04, and the SPDR S&P 500 ETF (NYSEARCA:SPY) slipped 0.4% to $742.88.
The Nasdaq was set to close the regular stock session at 4:00 p.m. Eastern. The exchange will be closed on Friday, July 3, for the Independence Day observed holiday, leaving the next normal cash session after the break.
