Nvidia’s stock price dipped nearly 3% on Monday following news of a Chinese antitrust investigation into its 2020 acquisition of Mellanox Technologies. Shares of competitors AMD and Marvell also declined, falling 4.4% and 5.2% respectively.
The investigation, launched by China’s State Administration for Market Regulation (SAMR), centers on whether Nvidia violated anti-monopoly laws by leveraging its acquisition of the Israeli chip designer. According to China Central Television, the SAMR is scrutinizing Nvidia’s compliance with the conditions of the original approval granted in 2020.
At the time of the $6.9 billion acquisition, Chinese authorities stipulated that Nvidia must not bundle its products with Mellanox offerings. Furthermore, both companies were obligated to maintain fair supply terms and ensure compatibility with chips produced by Chinese manufacturers. These conditions were partly influenced by escalating U.S. export controls targeting China’s chip industry.
This investigation comes on the heels of a September lawsuit filed by Texas-based startup Xockets, accusing Nvidia and Microsoft of monopolistic practices, patent infringement, and antitrust violations. Xockets alleges Nvidia has infringed on its patents related to advanced data processing units (DPUs) since acquiring Mellanox, which had allegedly adopted Xockets’ technology without permission in 2016.
The lawsuit contends that Nvidia and Microsoft’s use of these DPUs in data centers for accelerated computing and artificial intelligence infringes on Xockets’ intellectual property.
Adding to the complexities of the global chip landscape, the Biden administration recently tightened restrictions on the sale of high-bandwidth memory and chipmaking tools to China, impacting even U.S. companies operating abroad. These new rules from the Commerce Department’s Bureau of Industry and Security (BIS) cover 24 types of semiconductor manufacturing equipment and three types of chip development software. Furthermore, 140 unnamed Chinese entities, including semiconductor fabrication plants, equipment manufacturers, and investment firms, were added to the U.S. trade blacklist for alleged ties to the Chinese government.
In conclusion, the Chinese investigation into Nvidia’s Mellanox acquisition signals increased scrutiny of the chip industry amid escalating trade tensions and technological competition. The outcome of the investigation, coupled with the ongoing Xockets lawsuit and tightening U.S. export controls, will significantly impact the future landscape of the global semiconductor market. These developments highlight the challenges faced by major chipmakers like Nvidia as they navigate increasingly complex geopolitical and legal environments.
