Nvidia Faces Antitrust Investigation from China, Shares Drop

Shares of Nvidia dropped early on Monday following news that China is looking into the American microchip giant for possible violations of its anti-monopoly laws.

Chinese regulators have released a short statement indicating that their investigation is likely centered around Nvidia’s acquisition of Mellanox, a company specializing in network and data transmission, for $6.9 billion back in 2019.

As a result, Nvidia's shares fell by 2.5% during morning trading, bringing the stock price down to below $140.

Nvidia has become an industry leader, particularly noted for its role in the artificial intelligence sector. As demand for AI technology grows, Nvidia finds itself at the forefront, providing vital chips and data centers essential for the development and operation of AI systems used by major tech companies.

This year has seen a substantial rise in Nvidia's stock, which has tripled in value thanks to skyrocketing revenue fueled by AI-related demand. Data from FactSet shows that approximately 16% of Nvidia’s revenue is generated from China, making it the second-largest market for the company after the United States.

In its latest earnings report, Nvidia announced revenue of $35.08 billion, a staggering 94% increase from the $18.12 billion recorded last year. The company also reported earnings of $19.31 billion for the quarter, more than doubling the $9.24 billion from the same quarter last year. However, this report did not separate revenue figures specifically from China.

Recently, Nvidia’s market value surged to an impressive $3.5 trillion, surpassing Microsoft and briefly overtaking Apple as the most valuable company in the world.

The company, founded in 1999, revolutionized the computer graphics industry with its innovative graphics processing units (GPUs), propelling the growth of the PC gaming market.

Last month, Nvidia made headlines when it replaced Intel on the Dow Jones Industrial Average, marking the end of Intel's 25-year continuous presence on the index.

Unlike Intel, which manufactures its own chips, Nvidia design chips and relies on Taiwan Semiconductor Manufacturing Co., known as TSMC, for production.

The current antitrust scrutiny in China follows reports from this summer that the U.S. Justice Department is also examining claims from rival companies stating that Nvidia is misusing its dominance in the chip industry.

Reported allegations suggest that Nvidia has used its market power to threaten clients who choose to purchase products from both Nvidia and its competitors.

As the investigation continues, Nvidia remains a significant player in the tech industry, influencing not just the stock market but also the ongoing advancements in artificial intelligence technology.

Nvidia, investigation, China