TLDR
- China found Nvidia violated anti-monopoly laws with its 2020 Mellanox acquisition after a preliminary probe
- Nvidia shares fell 2% in pre-market trading following the announcement
- The ruling comes during sensitive US-China trade negotiations in Madrid
- China previously approved the $7 billion Mellanox deal but with conditions against discriminating Chinese companies
- Beijing launched the investigation in December 2024, targeting the world’s most valuable company
China’s market regulator ruled that Nvidia violated the country’s anti-monopoly laws with its 2020 acquisition of Mellanox Technologies. The State Administration for Market Regulation made the announcement after completing a preliminary investigation.
Nvidia shares dropped about 2% in pre-market trading following the news. The timing adds pressure during ongoing US-China trade talks in Madrid.
The regulator opened its probe into the $7 billion Mellanox deal in December 2024. Beijing originally approved the acquisition four years ago with specific conditions.
Those conditions required Nvidia not to discriminate against Chinese companies. The regulator did not specify exactly how Nvidia allegedly breached these requirements.
China’s announcement came as US and Chinese officials entered their second day of trade negotiations. The first day of talks lasted almost six hours, covering topics from TikTok to the global economy.
Trade Tensions Escalate
Over the weekend, China launched an anti-dumping investigation targeting semiconductors made by US companies including Texas Instruments. That company’s shares also fell roughly 2% in pre-market trading.
The moves come as both countries navigate complex technology restrictions. The US government banned Nvidia from selling its most advanced AI chips to Chinese companies, citing national security concerns.
Nvidia redesigned its chips at least twice to comply with American regulations. The company created versions it could legally sell in China while meeting US restrictions.
Beijing has since pushed local companies to avoid Nvidia’s H20 accelerator chip. Chinese authorities cited their own security concerns for the recommendation.
Last month, Nvidia reached a deal with Washington allowing chip sales to China. The agreement required Nvidia to give up 15% of that revenue to the US government.
Market Impact and Investigation
The preliminary ruling leaves uncertainty about potential remedies China might seek. The regulator said it would continue investigating Nvidia further.
Nvidia has found itself at the center of US-China technology tensions. The company dominates the market for chips essential to artificial intelligence services.
Companies from Meta Platforms to DeepSeek rely on Nvidia’s processors for AI operations. This makes the chipmaker crucial to the global AI development race.
China represents one of Nvidia’s largest markets for data centers, gaming, and artificial intelligence applications. CEO Jensen Huang has publicly advocated for American firms to maintain access to Chinese customers.
Huang estimated China’s AI market could reach $50 billion in the next two to three years. He warned that domestic players like Huawei would fill the gap if American companies lost access.
The investigation adds another layer to already complex trade relationships. Officials are expected to discuss potential meetings between Donald Trump and Xi Jinping as soon as October.
Both leaders are scheduled to attend a summit in South Korea. The current Madrid talks may lay groundwork for that potential meeting.
Trump told reporters Sunday that the talks are “going fine” but noted TikTok’s fate depends on Beijing’s actions. ByteDance’s popular app faces a deadline this week regarding its US operations.
The preliminary ruling represents China’s latest move in escalating technology tensions. The regulator’s decision not to specify exact violations leaves room for continued negotiations.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
