Nvidia Shares Drop Amid Chinese Probe Into “Suspected Anti-Monopoly Law Violation”

A week after the Biden administration’s new restrictions on China’s semiconductor industry triggered another tit-for-tat round with Beijing, China has launched an investigation into Nvidia for alleged anti-monopoly violations. 

According to a report from China Central Television, the State Administration for Market Regulation opened an investigation on Monday to determine whether Nvidia’s recent purchase of Israeli chip designer Mellanox Technologies violated anti-monopoly laws.

CCTV wrote in the report:

Recently, due to NVIDIA’s suspected violation of the Anti-Monopoly Law of the People’s Republic of China and the “Announcement of the State Administration for Market Regulation on the Anti-Monopoly Review Decision of Approving NVIDIA’s Acquisition of Equity in Mellanox Technologies Co., Ltd. with Additional Restrictive Conditions” (Announcement of the State Administration for Market Regulation [2020] No. 16), the State Administration for Market Regulation has initiated an investigation into NVIDIA in accordance with the law.

In 2019, Beijing approved Nvidia’s $6.9 billion acquisition of Mellanox on the condition that Nvidia does not discriminate against Chinese companies. This meant that the Israeli computer networking equipment maker would have to provide details about upcoming products to rivals within three months of making them available to Nvidia.

The investigation into Nvidia comes after Beijing fired a warning shot at the US early last week by banning the export of gallium, germanium, antimony, and other critical minerals with potential military applications. This tit-for-tat response followed the Biden administration’s broader restrictions on AI chip shipments to China. 

In markets, Nvidia shares in New York fell 2% in the early cash session. Shares have soared 180% this year. 

Earlier this year, Bloomberg revealed that the US Justice Department was investigating whether Nvidia violated antitrust laws. The department expressed concerns that the chipmaker made it more difficult for customers to switch to other suppliers. 

In July, Benoit Coeure, the head of France’s antitrust agency, stated that Nvidia could “one day” face antitrust charges, while the European Union launched an early-stage probe in 2023 to investigate potential anticompetitive abuses in the AI chip market.