Nvidia Under Investigation Amid Rising US-China Trade Tensions

Nvidia’s shares have taken a hit as China opened an investigation into the company’s past acquisition of Mellanox Technologies, accusing it of breaching anti-monopoly regulations. The probe, launched by China’s State Administration for Market Regulation (SAMR), follows a series of escalating trade actions between the US and China, further intensifying the global tech trade war.

The Investigation and Acquisition Details
The focus of China’s investigation is Nvidia’s $7 billion acquisition of Mellanox Technologies in 2020. This deal, which was approved by Chinese authorities with specific conditions, is now under scrutiny. One such condition required Mellanox to share product information with competitors 90 days before releasing new technologies. SAMR alleges that Nvidia may not have complied with this stipulation. The investigation represents a deeper dive into the broader implications of Nvidia’s expansion and business practices in the Chinese market.

Escalating US-China Trade Conflict
This investigation comes after the Biden administration imposed new export restrictions on AI chips to China in early December. The restrictions were introduced under the premise of national security, targeting 140 Chinese companies. This move has drawn sharp criticism from China, which accuses the US of “unilateral bullying” and violating international trade norms. In retaliation, Beijing has imposed its own set of export bans on key metals used in semiconductor production, such as gallium, germanium, and antimony. These minerals are vital for high-tech industries, and the ban signals a further deterioration in trade relations between the two superpowers.

Market Impact on Nvidia and Broader Semiconductor Industry
Nvidia’s stock saw a 2.6% drop following news of the investigation, which also weighed on other semiconductor companies, including ASML. Despite this setback, Nvidia remains one of the largest and most valuable companies in the world, with a market cap of $3.4 trillion. The company has seen significant growth in its data center sales, particularly in China, though the impact of US restrictions on its sales to the Chinese market has been evident. In the most recent quarter, China accounted for approximately 12% of Nvidia’s total revenue, a notable increase from earlier in the year.

The Future of US-China Tech Relations
The Nvidia investigation is a key marker of the ongoing tension between the US and China, particularly in the tech sector. As the two countries continue to clash over intellectual property, security concerns, and market access, companies like Nvidia face mounting challenges in navigating these complexities. The outcome of the investigation and the broader trade dynamics will likely influence Nvidia’s position in the Chinese market and its stock performance going forward.