China’s State Administration for Market Regulation (SAMR) announced on Monday that it has initiated an investigation into Nvidia over alleged violations of the country’s anti-monopoly laws.
The SAMR did not provide specific details on how Nvidia, known for its advanced AI and gaming chips, may have breached anti-monopoly laws. However, it also raised concerns about Nvidia’s compliance with commitments made during its 2020 acquisition of Israeli chipmaker Mellanox Technologies. Nvidia has not yet commented on the investigation, Reuters news report.
The move is widely viewed as a retaliatory measure against Washington’s recent restrictions targeting China’s semiconductor sector. Semiconductors are at the heart of global innovation, driving advancements in artificial intelligence, 5G, electric vehicles, and defense technologies.
“Nvidia’s dominance in AI chips and its reliance on the China market for growth make it a prime target, setting a precedent that could extend to other US tech giants,” said Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory and asset management organizations.
Shares of Nvidia fell 2.2 percent in pre-market trading following the announcement.
Background of Tensions
This development comes just days after the U.S. implemented its third wave of semiconductor export curbs in three years, restricting exports to 140 Chinese entities. In response, China banned the export of critical minerals such as gallium, germanium, and antimony to the U.S.
Additionally, four major Chinese industry associations issued a rare joint statement urging domestic companies to reduce their reliance on U.S. chips, citing national security concerns, and to prioritize local suppliers.
Nvidia’s Position in China
Nvidia, which previously dominated China’s AI chip market with over 90 percent market share, has faced increasing challenges due to U.S. export restrictions. These curbs have prevented the company from selling its most advanced AI chips to China, leading Nvidia to develop China-specific versions that comply with U.S. regulations.
China remains a significant market for Nvidia, accounting for 17 percent of its revenue in the fiscal year ending January 2023, down from 26 percent two years earlier.
Historical Precedents
The probe into Nvidia echoes a 2013 anti-monopoly investigation into Qualcomm, which resulted in a record $975 million fine for overcharging and abusing its market dominance in wireless communication technologies.
As the semiconductor rivalry between the U.S. and China escalates, Nvidia’s situation underscores the broader geopolitical tensions and the impact on multinational corporations operating in both markets.
