China’s market regulator, the State Administration for Market Regulation (SAMR), has announced a preliminary finding that U.S. chip giant Nvidia violated the country’s anti-monopoly law. This announcement coincides with ongoing trade talks between the U.S. and China in Madrid, where Nvidia’s chips are a key topic.
According to analysts, the timing of the announcement is likely a strategic move by China to gain leverage in the trade negotiations. The U.S. Treasury Secretary, Scott Bessent, acknowledged this, stating that the “poor timing” of the investigation was discussed during the talks.
A Potential Response to U.S. Actions
The SAMR’s ruling may be a direct counterpunch to the Trump administration’s recent decision to place 23 Chinese companies on a U.S. trade blacklist. Zhengyuan Bo, a partner at the research company Plenum, sees it as a “warning” that China is willing to “inflict damage on U.S. companies” if export controls continue to restrict China’s access to advanced technology.
This move could complicate the efforts of Nvidia’s CEO, Jensen Huang, to sell modified versions of his company’s advanced chips in China. Huang has made multiple visits to China this year to signal his commitment to the market, which has been severely impacted by U.S. export controls. Following the announcement, Nvidia’s shares fell 2.1% in pre-market trading.
The Mellanox Acquisition and Future Implications
The Chinese regulator’s investigation began in December and also focuses on Nvidia’s 2020 acquisition of Israeli chip designer Mellanox Technologies. Under the terms of the deal, Nvidia committed to continuing the supply of GPU accelerators to the Chinese market. However, recent U.S. export controls have forced the company to stop selling its most advanced accelerators in the country, a potential breach of the 2020 agreement.
The SAMR stated that its investigation is ongoing. Under China’s antitrust law, companies can face fines of 1% to 10% of their previous year’s annual sales. For Nvidia, this could amount to a fine of up to $1.7 billion, based on its $17 billion revenue from China in the last fiscal year. Beyond a fine, the regulator could potentially require Nvidia to sell its chips in China without the accompanying Mellanox technology.
While this ruling presents a new challenge for Nvidia, analysts believe it is not a sign that China is trying to force the company out of the market. Instead, it seems to be part of a broader strategy by both countries to gain an upper hand in the ongoing tech and trade disputes.
