Nvidia’s stock saw a more than 2% drop in pre-market trading on Monday, following a 1.8% decline last Friday, as China’s State Administration for Market Regulation (SAMR) opened an antitrust investigation against the US chipmaking giant.
The probe relates to Nvidia’s $7 billion acquisition of Mellanox Technologies, finalized four years ago.
SAMR alleges Nvidia may have violated conditions imposed during the deal’s approval, including commitments to ensure fair treatment of Chinese firms.
“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,” the SAMR said, according to a statement translated by CNBC.
The Chinese regulator’s statement highlights concerns over Nvidia’s compliance, citing potential discrimination against domestic competitors.
The Chinese government approved Nvidia’s $7 billion acquisition of Mellanox with the condition that Mellanox share new product information with competitors within 90 days.
Nvidia also agreed to allow Chinese chipmakers to ensure compatibility with Mellanox’s technology.
The company’s stock, which has surged nearly 188% this year due to booming demand for AI chips, now faces increasing challenges amid the escalating US-China tech rivalry.
Geopolitics, regulatory issues add to Nvidia’s challenges
This investigation comes against the backdrop of a larger geopolitical struggle over semiconductor technology.
The US has restricted Nvidia from selling its most advanced AI chips to Chinese firms, citing concerns over military applications.
In response, Nvidia has tailored products to comply with US export controls while maintaining a presence in the Chinese market.
Nvidia’s regulatory troubles are not confined to China.
Earlier this year, the US Department of Justice (DOJ) sought information regarding Nvidia’s potential violations of antitrust laws, according to Bloomberg News.
Officials expressed concerns that the company may have been restricting customers’ ability to switch to alternative suppliers and imposing penalties on buyers who did not exclusively use Nvidia’s artificial intelligence (AI) chips, sources familiar with the matter revealed.
Nvidia is also facing scrutiny in Europe.
In July, Benoît Cœuré, head of France’s antitrust agency, identified Nvidia as a target for ongoing investigations into chips used in AI.
Cœuré noted that the company could potentially face antitrust charges “one day,” signalling France’s growing focus on competition concerns in the AI technology market.
Nvidia’s dominant position in AI chipmaking places it at the intersection of technological and geopolitical tensions.
With China’s probe adding to scrutiny from Western regulators, the company faces mounting pressure to navigate complex regulatory landscapes.
While Nvidia has fuelled the tech sector’s growth and market optimism, these investigations could weigh on its future strategy and profitability.
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