China launches anti-monopoly probe into NVIDIA amid U.S. trade friction

China’s State Administration for Market Regulation (SAMR) has initiated an anti-monopoly investigation into NVIDIA, the U.S. chipmaking giant known for its advanced AI and gaming chips. The regulator alleges potential violations of China’s competition laws and is also scrutinizing NVIDIA's adherence to conditions set during its 2020 acquisition of Israeli chip designer Mellanox Technologies.

The announcement, which offered limited details about the nature of the violations, has been widely interpreted as a countermeasure to Washington’s recent restrictions on China’s semiconductor industry. The Mellanox deal, approved by Chinese authorities under strict conditions, required NVIDIA to provide fair access to its GPU accelerators and Mellanox’s networking equipment to Chinese customers. This included a commitment to supply products on non-discriminatory terms and avoid forced product bundling or unreasonable trade practices.

This investigation is seen as part of the broader economic and technological competition between the U.S. and China. Last week, the U.S. imposed its third major crackdown on China's semiconductor sector in three years, expanding export restrictions to 140 Chinese entities, including chip equipment manufacturers. In retaliation, Beijing banned exports of critical minerals like gallium and germanium, essential for semiconductor production.

NVIDIA has been caught in the crossfire of these geopolitical tensions. U.S. sanctions in 2022 barred the sale of its advanced A100 and H100 AI chips to China, leading the company to create modified versions to comply with export controls. However, stricter U.S. regulations in 2023 further curtailed these sales, prompting NVIDIA to develop additional variants specifically for the Chinese market.

China accounted for about 17% of NVIDIA’s revenue as of January 2023, down from 26% two years prior. While the company remains a leader in China’s AI chip market, domestic competitors, particularly Huawei, are rapidly gaining ground.

Analysts suggest that the probe is unlikely to cause significant short-term disruptions for NVIDIA, given existing U.S. export controls. However, it highlights the deepening rift between the two nations as they vie for dominance in critical technologies like semiconductors, underscoring the escalating stakes in the U.S.-China trade war.

Meanwhile, NVIDIA's stock, which has seen remarkable growth this year, dipped by approximately 3% on December 9. Despite the decline, the shares remain up an impressive 179% year-to-date.