China says preliminary probe shows Nvidia violated anti-monopoly law

BEIJING: China's market regulator on Monday said that a preliminary investigation had found that Nvidia had violated the country's anti-monopoly law, marking the latest hit for the U.S. chip giant.

The brief statement from the State Administration for Market Regulation did not elaborate on how the U.S. company, known for its artificial intelligence and gaming chips, might have violated China's anti-monopoly laws.

China in December launched an investigation into Nvidia over what it said were suspected violations of the country's anti-monopoly law, a probe that was widely seen as a retaliatory shot against Washington's curbs on the Chinese chip sector.

The Chinese regulator also said the U.S. chipmaker was suspected of violating commitments it made during its acquisition of Israeli chip designer Mellanox Technologies, under terms outlined in its 2020 conditional approval of that deal.

The SAMR on Monday added that it would continue its investigations. Nvidia did not immediately respond to a request for comment.

ANTITRUST VIOLATIONS CAN CARRY HEFTY FINES

According to China’s antitrust law, companies can face fines of between 1% and 10% of their annual sales from the previous year. China generated $17 billion in revenue for Nvidia in the fiscal year ending January 26, or 13% of total sales, based on its latest annual report.

Nvidia's shares fell 2% in pre-market trading on Monday.

The Chinese market regulator's announcement comes as the U.S. and China hold trade talks in Madrid, where chips, including the ones made by Nvidia, are expected to be on the agenda.

The extent to which China can have access to cutting-edge AI chips is one of the biggest flashpoints in the U.S.-Sino war for tech supremacy.

Nvidia, the world's top maker of AI chips whose fortunes have soared with the AI wave, has been at the centre of the fray. U.S. President Donald Trump's administration has imposed and then relaxed some of its more severe restrictions on the company's sales of advanced chips to China.

At the same time, China is keen for its tech industry to wean itself off U.S. chips. Chinese authorities have summoned companies, including Tencent (0700.HK), opens new tab and ByteDance, over their purchases of Nvidia's H20 chip, asking them to explain their reasons and expressing concerns over information risks, sources said last month.

Also last month, China's cyberspace regulator summoned Nvidia representatives to explain whether the H20 chip, which Nvidia tailored for China, posed backdoor security risks that could affect Chinese user data and privacy..