China is going after Nvidia: Suspected abuse of dominance

The Chinese government has launched an investigation into Nvidia Corp, a leading US chipmaker, over suspected violations of antitrust laws. Authorities' interest is focused on Nvidia's landmark 2020 acquisition of Israeli firm Mellanox Technologies for $7 billion. The move comes at a time of growing tensions between the United States and China over technology dominance and regulation.

China's State Administration for Market Regulation (SAMR) announced the launch of an investigation into the conduct of Nvidia $NVDA and the terms associated with the Mellanox Technologies acquisition. China approved the acquisition four years ago on the condition that Nvidia not discriminate against Chinese firms and ensure that new Mellanox products are made available to competitors within 90 days of their launch. Nvidia also committed to allow Chinese chipmakers to verify the compatibility of their products with Mellanox technologies.

However, the approval of this acquisition is now coming under scrutiny, particularly in the context of recent moves by the United States to ban the sale of Nvidia's state-of-the-art chips to Chinese firms. These restrictions, which are intended to limit China's ability to develop AI-based services, have drawn sharp criticism in Beijing.

Global investigation

For Nvidia, the investigation by Chinese authorities is not the first such experience. The U.S. Department of Justice this year also probed whether the company violates antitrust laws by making it harder for customers to switch suppliers or by penalising buyers who don't exclusively use its AI chips. In addition, France in July publicly named Nvidia as the subject of its own investigation into chips used in AI, with the head of the antitrust authority there not ruling out the possibility of future charges.

Impact on the stock

News of the Chinese investigation had an immediate impact on Nvidia's stock. On Monday, before the US stock markets opened, the company's shares fell by 2%. Already on Friday, the stock saw a drop of 1.8% and closed at USD 142.44.

Conclusion

Nvidia's investigation in China highlights its key role in the technology war between the United States and China. Although Nvidia has sought to develop AI chips that comply with US regulations while allowing Chinese firms to work on new technologies, its global position makes it a target of antitrust investigations across continents. The results of these investigations could have far-reaching implications for the future of not only Nvidia, but the entire AI sector.

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