China Accuses NVIDIA Of Violating Anti-Monopoly Law As Tensions With US Escalate

China's market regulators announced today a preliminary finding that U.S.-based chip giant NVIDIA has violated the country's anti-monopoly law. The declaration from the State Administration for Market Regulation (SAMR) adds more sparks to the already tense trade and tech rivalry between the world's two largest economies.

The investigation stems from NVIDIA’s 2020 acquisition of Israeli networking company Mellanox Technologies. At the time, Beijing had granted conditional approval to the $6.9 billion deal, imposing stipulations that were meant to prevent monopolistic practices, such as product bundling and restricting market access. While the SAMR’s statement did not specify the exact nature of the violations, it stated that NVIDIA failed to comply with these commitments and that it would pursue a "further investigation into it in accordance with the law."

As SAMR's investigation is pending, what penalties against NVIDIA is yet uncertain. That said, China's anti-monopoly law allows for fines ranging from 1-10% of a company’s previous year’s annual sales. Considering NVIDIA's 2024 fiscal year sales from China totaled approximately $10 billion (or about 13% of its global revenue), the fine would be a significant dent in the bottom line. NVIDIA's stock experienced a 2% dip in pre-market trading following the news. 

All told, this announcement is part of a broader pattern of increased probing by Beijing. Chinese authorities have also launched an anti-dumping probe into U.S.-made analog chips and a separate investigation into U.S. policies toward its chip sector. Furthermore, Chinese regulators have reportedly summoned domestic tech companies like Tencent and ByteDance to question their purchases of NVIDIA's chips, citing potential security risks.

NVIDIA has not yet issued an official comment on the preliminary ruling, but we definitely don't envy it being at the center of a geopolitical firestorm. The company had previously tailored the H20 AI chip specifically for the Chinese market to comply with U.S. export controls, but even that hasn't shielded the company from Beijing’s scrutiny.