Smuggling AI servers into China didn’t change the downward trend in Super Micro’s gross margin Excerpt: "...servers sold for $510 million between late April 2025 and mid-May 2025..." Full article: At least ~10% of Super Micro’s 2Q CY2025 revenue was tied to servers reportedly smuggled into China. In theory, these should carry much higher margins, but gross margin still declined sharply to 9.6% (vs. 11.3% in 2Q CY2024). Two possibilities: 1. Margins in the legitimate business are simply too weak. This is consistent with my earlier view that AI server assembly margins are under pressure ( Super Micro’s structural disadvantages, including smaller scale and weaker execution, further amplify margin pressure. 2. Super Micro likely wasn’t the only one involved in smuggling. With alternatives available, buyer leverage increased, so margins on those sales were probably not as high as expected.

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