Nvidia shares tumbled over 3% on Monday following news that China’s State Administration for Market Regulation has launched an antitrust investigation into the AI chipmaking giant. Trading around $137.91 per share shortly after the opening bell, Nvidia faces scrutiny over its $6.9 billion acquisition of Mellanox, a chip design firm purchased in 2019.
Chinese regulators initially approved the Mellanox deal in 2020 with specific conditions attached, including restrictions that would prevent Nvidia from combining products or discriminating against Chinese firms. However, authorities now suspect the company may have violated these terms. According to a statement from China’s market regulation administration, the probe was opened “due to Nvidia’s suspected violation of China’s anti-monopoly law and the State Administration for Market Regulation’s restrictive conditions around Nvidia’s acquisition of Mellanox shares.”
The timing of China’s investigation is significant, coming just weeks after the Biden administration imposed fresh restrictions on chip exports to China. The US introduced new controls this month targeting 140 Chinese chip companies, aimed at curbing the country’s semiconductor capabilities. This regulatory action appears to be part of the ongoing technological tensions between the world’s two largest economies.
Nvidia is no stranger to regulatory scrutiny. Last week, EU regulators launched their own antitrust investigation into the company’s sales practices, while the US Department of Justice is also probing Nvidia for potential antitrust violations. In response to the DOJ investigation, Nvidia defended its practices, stating: “We compete based on decades of investment and innovation, scrupulously adhering to all laws, making Nvidia openly available in every cloud and on-prem for every enterprise, and ensuring that customers can choose whatever solution is best for them.”
Despite mounting regulatory pressures from multiple jurisdictions, Nvidia’s stock has surged nearly 190% in 2024, driven by the explosive growth in artificial intelligence applications. The company’s dominance in AI chip manufacturing has made it a cornerstone of the AI revolution, with its GPUs powering everything from large language models to autonomous vehicles. Investor enthusiasm remains strong, particularly around Nvidia’s next-generation chip architectures, Blackwell and Rubin, which have generated significant bullishness among analysts and market watchers alike.
Key Quotes
In recent days, due to Nvidia’s suspected violation of China’s anti-monopoly law and the State Administration for Market Regulation’s restrictive conditions around Nvidia’s acquisition of Mellanox shares … the State Administration for Market Regulation is opening a probe into Nvidia in accordance with law
This statement from China’s State Administration for Market Regulation explains the official basis for launching the antitrust investigation, signaling potential violations of the conditions attached to the 2020 Mellanox acquisition approval.
We compete based on decades of investment and innovation, scrupulously adhering to all laws, making Nvidia openly available in every cloud and on-prem for every enterprise, and ensuring that customers can choose whatever solution is best for them
Nvidia’s statement to Reuters defending its business practices in response to the DOJ antitrust investigation demonstrates the company’s position that its market dominance stems from innovation rather than anti-competitive behavior.
Our Take
China’s antitrust probe represents a strategic countermove in the escalating tech war between the US and China. As Nvidia dominates the AI chip market with an estimated 80-95% market share in AI accelerators, it has become a geopolitical pressure point. The investigation’s timing—immediately following new US export restrictions—suggests this may be retaliatory rather than purely regulatory. However, Nvidia’s multiple concurrent investigations across three major jurisdictions (China, EU, and US) indicate genuine concerns about monopolistic practices in the critical AI infrastructure market. The company’s near-200% stock gain in 2024 reflects its indispensable role in the AI revolution, but mounting regulatory risks could constrain future growth and force changes to its business model. This situation exemplifies how AI leadership has become inseparable from geopolitical strategy.
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