China has begun an investigation of Nvidia for allegedly breaking anti-monopoly laws connected to its 2020 acquisition of Mellanox for $7 billion. The news of the probe provoked a strong negative reaction on Wall Street with one financial advisor saying the US-Chinese rivalry has entered a new chapter with semiconductor trade at the center.
The China State Administration for Market Regulation issued a short statement Monday about the probe saying it is looking at Nvidia’s “suspected violation of the Anti-Monopoly Law“ of the PRC and the Mellanox purchase, which China approved four years ago on condition Nvidia did not discriminate against Chinese companies.
Nvidia issued a short statement to Fierce Electronics and other media saying it is “happy to answer any questions regulators may have about our business.”
In similar matters regarding China trade and investigations, Nvidia has responded in similar fashion, adding Monday, “Nvidia wins on merit, as reflected in our benchmark results and value to customers, and customer can choose whatever solution is best for them. We work hard to provide the best products we can in every region and honor our commitments everywhere we do business.”
The 2020 approval of the Israel-based Mellanox, a networking equipment maker, was conditioned on Mellanox providing information about new products to rivals within 90 days of making them available to Nvidia.
Nvidia shares dropped more than 2% on Monday. They had been up by nearly 200% for all of 2024.
China in the past has been critical of Biden administration efforts to stem China’s growth in advanced chips, including barring Nvidia from selling many advanced semiconductors to Chinese companies in China. Nvidia receives about 15% of all revenues from customers in China, but China is also seen by Nvidia and many other companies as a prime growth market given its sheer size as an economic power.
China has also targeted other US companies, including Micron, which has said half its memory sales are to China-based customers. The Chinese government is conducting a cybersecurity probe and said Micron’s products failed a review, then barred Micron chips from use in critical infrastructure.
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Nvidia is also under US scrutiny for whether it violated antitrust laws, according to reports not yet confirmed by US Justice officials. Antitrust officials have questioned if Nvidia makes it difficult to switch to other suppliers and even penalizing buyers that didn’t exclusively use Nvidia AI chips, according to people who has been cited by Bloomberg News. Nvidia said in June it had not received a subpoena from US Justice officials.
RELATED: Nvidia denies it received an antitrust subpoena from Justice officials
DeVere Group CEO Nigel Green issued a statement saying the Chinese antitrust probe “signals the critical importance of this industry in the ongoing geopolitical battle and should be a wake-up call for investors to act decisively.”
Green said President-elect Trump is expected to amplify on the Biden administration’s recent restrictions on advanced chips and chipmaking equipment to China.
Green added: “This isn’t just a regulatory issue. It’s a calculated geopolitical maneuver. China is sending a strong message that it won’t hesitate to push back and Nvidia’s targeting is a harbinger of more aggressive measures to come…The US-China economic rivalry is entering a new phase, and the semiconductor industry is at the heart of it.” He said semiconductors are a “key battlefield in the Tech Cold War and the fallout from these tensions will roll out across industries.”
Trump has promised to impose tariffs on goods from abroad, with increases on tariffs on goods received in the US from China. As a result, Green joined other industry officials urging customers to diversify their chip supply chain to adapt to a “fragmented global economy.”