The Chinese State Administration for Market Regulation stated that it is to open up an investigation into Nvidia. This investigation is regarding anti-monopoly regulations related to the $6.9 Billion purchase of Mellanox Technologies back in 2020.
This scrutiny comes as the US and China engaged in a trade war as both countries want to control the most crucial technology markets.
China contributes only around 10% of NVIDIA revenue. Any disruptions in this key market could significantly impact the company's financial outlook.
Early this month the Biden administration released its third order on export controls that aims at China and covers security interests. These measures are targeted at restricting the access of China to those most superior semiconductors that are needed in artificial intelligence and the military.
To this, Chinese officials called on local enterprises to stop using the American-made chips, saying that these are “no longer safe” due to the escalating trade war.
In response, Chinese officials called on domestic firms to shun use of the US chips terming them as“no longer safe” due to the trade relations tension.
The company redesigned three AI chips specifically for the China bound market to comply with US regulations while ensuring continued engagement with Chinese customers.
Chief executive officer Jensen Huang mentioned that Nvidia remained loyal to US trade regulations. He stated, "Whatever the new administration decides, we'll, of course, support the administration and comply with any regulation that comes along fully."
The antitrust probe by China and restrictions on exports by the US has put Nvidia right in the heart of trade conflict. Nevertheless, Nvidia has proved quite flexible in managing these challenges. However, the risk of geopolitical considerations cannot be ruled out.
To the investors, such development means that they have to consider aspects of regulatory moves and market trends in relation to the continued regulation of international trade and the effort that Nvidia has to apply in order to remain relevant and competitive in the market for AI chips.