Nvidia Faces $5B Fine, $100B Market Drop in Antitrust Probe

On December 9, 2024, Nvidia became the subject of an antitrust investigation by China's State Administration for Market Regulation (SAMR), following accusations of violating commitments made during its 2020 acquisition of Mellanox Technologies. As part of the approval process for the acquisition, Nvidia had agreed to fair and non-discriminatory practices in the sale of GPU accelerators and Mellanox equipment. Specifically, the company promised not to impose mandatory bundling or unreasonable transaction conditions, and to maintain a commitment to continue supplying these products on fair and equitable terms.

However, since 2022, Nvidia has been accused of repeatedly halting the supply of GPU products to the Chinese market, in apparent violation of these commitments.

Sources reveal that Nvidia's actions were reported to Chinese authorities as early as 2022, prompting an investigation into the matter. This move comes amid heightened tensions between the U.S. and China, particularly as the U.S. has increased export controls on Chinese technology companies. Experts believe that this investigation is not only a response to Nvidia's alleged misconduct but also part of China's broader counteraction to U.S. unilateral export control policies. This development follows the U.S. government's recent decision, on December 2, 2024, to add 140 Chinese semiconductor companies to its entity list.

Under China's Antitrust Law, if a company breaches its commitments during an acquisition, and its actions result in the exclusion or restriction of competition, it could face fines of up to 10% of its sales revenue from the previous year. With Nvidia's 2023 revenue in China reaching $10.4 billion, the company could face a fine ranging between $100 million and $1 billion.

Further, under Article 63 of the Antitrust Law, if the violation is deemed particularly severe, the fines could be multiplied by 2 to 5 times, potentially bringing the penalty to between $2 billion and $5 billion.

In addition to China's scrutiny, Nvidia has faced regulatory action from the U.S. and the European Union. In September 2024, the U.S. Department of Justice initiated its own antitrust investigation into Nvidia, citing concerns over its dominant market share in AI chips, which now exceeds 90%.

Following the announcement of the investigation, Nvidia's stock price dropped nearly 2% after hours, resulting in a loss of nearly $100 billion in market value overnight.

This investigation poses significant legal and financial risks for Nvidia and could have far-reaching implications for its operations and strategy in the Chinese market.