China-US Tensions: Nvidia Under Scrutiny From Chinese Regulators

Long before Donald Trump shook up global diplomacy, Sino-American tensions over technology were already boiling. Between economic sanctions and trade wars, Xi Jinping’s country and the United States are vying for technological supremacy. Today, at the heart of this power struggle, Nvidia is under Chinese investigation, rekindling tensions in the semiconductor and artificial intelligence markets.

Nvidia under Beijing’s scrutiny

Nvidia, a company that sees AI as a winning bet, is currently the subject of an investigation for alleged violations of the antitrust law, causing quite a stir. This investigation, officially related to the acquisition of Mellanox in 2020, seems mainly to be a response to American restrictions on electronic chips.

Since 2022, the United States has banned the export of Nvidia’s A100 and H100 chips, creating a real headache for the company. These semiconductors, sought after by Chinese research institutes on AI and military agencies, are, however, essential in strategic sectors.

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A statement from O’Donnell, an analyst at TECHnalysis Research, sheds light on the limited short-term impact:

« China can complain as much as it wants, but Nvidia is no longer a major player in the direct sales of advanced chips in this market. »

Yet, the friction doesn’t stop there. The semiconductors modified to meet Chinese standards have also been quickly caught up by enhanced sanctions in 2023.

Noteworthy:

• In 2023, China still accounted for 17% of Nvidia’s revenue, down from 26% in 2021;
• Before the restrictions, Nvidia held more than 90% of the Chinese AI chip market.

This tense context, marked by technological rivalries and trade restrictions, highlights that Nvidia is walking on eggshells while juggling political pressures and strategic innovations.

The battle of AI chips: Nvidia strikes back

In the struggle for artificial intelligence, Nvidia has not said its last word. If Beijing intensifies its efforts to develop local alternatives, particularly through Huawei, Nvidia continues to dominate the sector thanks to unmatched technologies. However, the Chinese investigation could harm its image and limit its ability to collaborate with certain Asian partners.

The technological war is not just about companies. Governments are also getting involved, as evidenced by the Chinese ban on exports of critical minerals such as gallium and germanium. For Nvidia, the challenge is twofold: to avoid being marginalized in the Chinese market while respecting the rules of its own country.

In 2020, the conditional approval of the acquisition of Mellanox Technologies by China already imposed strict obligations on Nvidia. These conditions included total transparency on pricing and guarantees to prevent any abuse of dominant position. Yet, these measures did not prevent Beijing from launching an investigation today.

NVIDIA said on Thursday on its official Chinese Weibo account that recent reports about the company cutting off supply to China were false rumors. China is an important market for NVIDIA, and the company will continue to provide high-quality and efficient products and services to… pic.twitter.com/MyX8lwUPO6

— Global Times (@globaltimesnews) December 12, 2024

The current climate, where each sanction seems to call for a retaliation, amplifies the challenges for Nvidia. The question is simple: will the company be able to maintain its dominant position in the field of semiconductors and artificial intelligence despite an increasingly fierce trade war?

Finally, this case highlights the growing tensions between economic giants. Nvidia’s anticompetitive practices have also caught the attention of American authorities: last September, the DOJ took action against the company, causing panic in the AI crypto space.