Nvidia Shares Drop 2.6% Following China's Antimonopoly Probe Over Mellanox Acquisition

Experts believe China's antimonopoly probe was a response to rising US-China trade tensions.

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This picture taken on March 11, 2019 in the Israeli coastal city of Tel Aviv shows the logo of Israeli electronics chip-maker Mellanox (R) and US tech giant Nvidia Corporation, ahead of a press conference by the former's CEO announcing a merger with the latter. JACK GUEZ/AFP via Getty Images

Nvidia shares declined 2.6% after the SAMR said it is probing Nvidia for breaching anti-monopoly laws as part of its acquisition of Mellanox, a Tel Aviv-based tech company specializing in data center and server network solutions.

If recalled, the chipmaker giant sealed the deal with Mellanox in 2020. Now, part of China's probe will investigate the agreements both companies had agreed on during the acquisition process.

However, with about 4 years passing, CNBC reported that experts believe these investigations are linked to the ongoing tensions between the US and China in the semiconductor sector. This trade clash is evident in restrictions on chipmakers, such as Nvidia, in selling advanced AI chips to China. At the end of the day, the measures are all aimed at curbing China's military power.

In response, Nvidia has come out with alternate solutions that are compliant with US regulations specifically for the Chinese market.

Global Competition in Chipmaking

Both the US and China are vying for the top spot in a technology advancement sector like chip making. Recently, on December 2, the US restricted Chinese makers, bringing about further tension in the trade sector. Analysts think that the investigation that Nvidia is facing in China might be in response to all such mounting trade restrictions.

Regardless, Nvidia has had a fantastic year despite these challenges. Shares have risen by 180% with investors' zeal for AI technology after the huge success recorded by tools like ChatGPT. Its performance has enormously led to the general gains of the overall technology sector, thus making Nvidia the greatest contributor to its share of leadership within AI and chip manufacturing.

Reuters shared that Nvidia responded to the investigation by saying it is ready to cooperate with regulators. The company said that it remains committed to delivering value to customers through innovative solutions and expressed confidence in the quality of its products.

With shares declining, investors and industry observers will also be watching how Nvidia will take the regulatory investigation.

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Nvidia, China

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