Nvidia is under investigation in China for allegedly breaching anti-monopoly regulations, marking a new chapter in the intensifying tech trade war between the US and China. The probe follows recent export restrictions imposed by the Biden administration on the Chinese tech sector, further escalating tensions between the two global superpowers.
Details of the Investigation
China’s State Administration for Market Regulation (SAMR) announced on December 6, 2024, that it had officially launched an investigation into Nvidia, specifically regarding its 2020 acquisition of Mellanox Technologies Ltd, a leading Israeli networking company. The $7 billion deal, aimed at boosting Nvidia’s data center capabilities, was approved by Chinese regulators under specific conditions, including a requirement for Mellanox to share its new product information with competitors within 90 days of release.
SAMR is investigating whether Nvidia violated these commitments, potentially breaching the conditions set out during the approval of the acquisition. This marks a significant development in Nvidia’s operations in China, where the company has seen rapid growth and rising tensions due to shifting US policies.
Background on US-China Tech Tensions
The investigation comes in the wake of a new set of export restrictions imposed by the US on China. On December 2, 2024, the Biden administration unveiled restrictions designed to limit China’s access to advanced AI chip technology, citing national security concerns. These measures, which target 140 Chinese companies involved in producing critical chips, are part of a broader effort to curtail China’s ability to develop cutting-edge AI technologies.
China strongly condemned the move, accusing the US of “abusing export control measures” and “implementing unilateral bullying” to undermine its technological ambitions. In retaliation, China imposed its own export restrictions the following day, halting shipments of several critical materials, including gallium, germanium, antimony, and superhard materials—key components in semiconductor manufacturing.
This exchange is emblematic of the broader trade war between the US and China, which has seen the two countries increasingly use technology as leverage in their geopolitical struggle. The growing tensions have affected multiple sectors, particularly the semiconductor and AI industries.
Impact on Nvidia’s Market Position
The investigation and the broader geopolitical climate have already started to impact Nvidia’s stock performance. Shares of the company fell 2.6% on December 6, in part due to concerns over the investigation and its implications for the company’s operations in China. This slide affected the broader semiconductor sector, with shares of other industry players, such as ASML, also dipping. Despite this, Nvidia remains one of the most valuable companies globally, with a market capitalization of approximately $3.4 trillion (€3.2 trillion). The company’s share price has surged 188% year-to-date, driven largely by its dominance in AI chip technology and data center sales.
However, Nvidia’s sales in China have faced increasing challenges due to US restrictions that have been in place since 2023. These rules limit Nvidia’s ability to sell its most advanced AI chips to Chinese companies, although Nvidia has adapted by modifying its chip designs to comply with Chinese regulations. As of the latest quarter, China accounted for approximately 12% of Nvidia’s total revenue, a significant increase from the previous year, reflecting the company’s efforts to maintain a foothold in the Chinese market.
Looking Ahead: Potential Consequences for Nvidia
The ongoing tensions between the US and China are likely to continue affecting Nvidia’s global operations, particularly as both countries tighten their technological and economic policies. The investigation into Nvidia’s acquisition of Mellanox adds a layer of complexity, as the company faces potential regulatory hurdles in one of its largest markets. If the probe leads to further restrictions or penalties, it could limit Nvidia’s growth potential in China and undermine its broader market position.
Furthermore, the wider semiconductor industry is likely to be impacted by these geopolitical shifts. As both the US and China pursue greater technological self-sufficiency, companies like Nvidia may face increased pressure to navigate a fragmented global market, with restrictions on the flow of goods and technology between the two countries.
Conclusion
Nvidia’s investigation by Chinese authorities represents the latest escalation in the ongoing tech trade war between the US and China. As tensions rise, Nvidia’s ability to sustain its strong market performance will be tested, particularly as it navigates regulatory challenges in China and adapts to shifting geopolitical landscapes. While the company remains a leader in the AI chip sector, the growing restrictions on its Chinese operations could have long-term implications for its global strategy and market valuation.
