Nvidia shares slid amid an escalation in the tech trade war as China launched a probe into the company on suspicion of breaching the anti-monopoly law.
Nvidia’s shares fell as China opened a probe into the tech giant on suspicions of violation of the country’s anti-monopoly law. The investigation followed the Biden administration’s fresh restrictions on AI chip export to China, announced a week ago, marking an escalation of the trade war between the two countries.
China’s State Administration for Market Regulation announced on Monday that it had officially launched an investigation into Nvidia regarding its acquisition of Mellanox Technologies Ltd, an Israeli technology firm, four years ago. The acquisition has been approved by Beijing subject to a number of conditions. The Administration said Nvidia is suspected of violating these commitments made as part of the approval process.
In 2020, Nvidia acquired Mellanox Technologies Ltd for $7bn (€6.6bn) to enhance its data centrer’s capabilities. Mellanox specialised in networking technology, and Nvidia stated that the merger would enrich the “ecosystem of partiers” in the AI field. In a condition made with the Chinese government, Mellanox would need to share information with rivals of new products within 90 days before release.
Escalating tech trade war between the US and China
On 2 December, the US announced new export restrictions to curb China’s ability to develop the most advanced AI technology, citing “national security” concerns. The new rules targeted 140 additional Chinese companies that produce critical chips to supply China’s tech industry with “self-efficiency”.
China condemned the US decision, accusing it of “generalising the concept of national security, abusing export control measures, and implementing unilateral bullying”, and vowed to “take necessary measures to resolutely safeguard its own rights and interests”.
The next day, Beijing imposed an export ban on several critical metals and minerals, all essentials in making semiconductors and other high-tech devices, to the US. The Ministry of Commerce said the country will no longer ship Gallium, germanium, antimony, and superhard materials to America.
The Nvidia probe is considered a further escalation in the mounting trade tensions between the two countries. With Trump’s hardcore stance on tariffs, the ongoing China-US trade war may negatively impact the AI chip maker’s market valuation going forward.
Nvidia shares slid
Nvidia’s shares fell 2.6% on Monday, weighing on the broad semiconductor sector. The European chip equipment maker, ASML’s stocks slipped 0.38%. Despite this, Nvidia remains the world’s second-largest company with a market cap of $3.4tn (€3.2tn). Its shares are up 188% year-to-date.
In the third quarter, Nvidia again blew out market expectations with another record data center sales figure, up 112% from a year ago. However, the company also raised concerns about capacity constraints, causing its share price to fall 2% on the day.
Nvidia’s chip sales in China have been negatively affected by the US export restrictions since 2023. However, the company has been consistently tailoring its chip design to the Chinese markets to get around the regulatory hurdles. China sales accounted for approximately 12% of Nvidia’s total revenue in the latest quarter, up from a single-digit percentage at the start of this year.
