China has launched an antitrust investigation into Nvidia, the leading US chipmaker and a dominant player in artificial intelligence (AI) technology. This move underscores the intensifying competition between Beijing and Washington in the critical field of AI development.
AI Arms Race: China Targets Nvidia
China Central Television reported on Monday that Nvidia's acquisition of Israeli networking firm Mellanox may have violated China's anti-monopoly laws. While specifics of the alleged breaches remain unclear, China had previously approved the acquisition in 2020.
Following the news, Nvidia's shares experienced a slight dip in pre-market trading on Monday. Despite this, the company remains one of the market's top performers, with its stock soaring nearly 200% this year, driven by unprecedented demand for AI chips amid a global AI boom. Valued at over £2.34 trillion ($3 trillion), Nvidia trails only Apple in market capitalisation.
The Biden administration's recent restrictions on chip exports to China have further escalated tensions in the ongoing tech war between the two superpowers. While Nvidia's graphics processors differ from memory chips in function, both are crucial for powering advanced AI systems, highlighting the stakes in this intensifying technological rivalry.
US-China Tech War Escalates
This isn't the first time China has targeted a major US tech firm under antitrust laws. In 2013, Qualcomm faced a £764.91 million ($975 million) fine following a probe into its market dominance. Analysts suggest the current Nvidia investigation may be more symbolic, given the pre-existing US restrictions on Nvidia's chip sales to China.
Sam Stovall, chief investment strategist at CFRA Research in New York, told Reuters: "The market was taken a bit by surprise regarding China's investigating Nvidia as a possible antimonopoly-law violation. So that's one thing that's putting a little damper on the market."
The US Commerce Department has implemented three rounds of restrictions on chip sales to China, citing fears that China could leverage AI for military purposes. Industry experts agree these measures are likely to hinder China's ability to develop advanced AI chips.
China's Commerce Ministry has strongly criticised the US restrictions, describing them as a significant threat to global supply chain stability. In retaliation, China has banned the export of essential chip manufacturing materials such as germanium and gallium, effectively closing loopholes that had allowed for limited exports over the past year.
Nvidia: A Key Player in the US-China Tech Rivalry
Nvidia finds itself at the centre of the escalating tech conflict. As a leader in the AI revolution, any disruption to Nvidia's operations could undermine US ambitions to maintain global AI dominance. The company also faces antitrust scrutiny in its home market, adding another layer of complexity to its challenges, according to Bloomberg.
Beyond export controls, both nations are ramping up investments in domestic semiconductor development. The US CHIPS Act has allocated billions of pounds to companies like Intel to strengthen domestic chip production and reduce dependence on foreign suppliers, particularly China.
Meanwhile, China has announced plans for its largest-ever semiconductor state investment fund, worth £37.26 billion ($47.5 billion). This initiative is backed by six major state-owned banks and aims to bolster the country's microprocessor development capabilities.
