Nvidia shares fall as China launches probe into alleged antitrust violations

Shares of Nvidia fell early on Monday after China said it is investigating the high-end microchip company for alleged violations of Chinese antitrust laws.

In a brief press release with few details, Chinese regulators appear to be focusing on Nvidia’s $6.9 billion acquisition of network and data transmission company Mellanox in 2019.

Shares of Nvidia fell 3% on Monday, falling below $140.

Considered a haven for artificial intelligence demand, Nvidia has made the AI ​​sector one of the stock market’s biggest companies as the tech giants spend heavily on the company’s chips and data centers needed to train and operate their own AI systems.

Shares of Nvidia have nearly tripled this year with the California company’s revenue and profits rising on demand for AI. According to data firm FactSet, about 16% of Nvidia’s revenue comes from China, second only to its US-generated revenue.

In its most recent earnings release, Nvidia posted revenue of $35.08 billion, up 94% from $18.12 billion a year earlier. Nvidia earned $19.31 billion in the quarter, more than double the $9.24 billion it posted in the third quarter last year. The earnings release did not break out earnings from China.

The company’s market value soared to $3.5 trillion recently, overtaking Microsoft and briefly overtaking Apple as the world’s most valuable company.

Nvidia’s invention of graphics processor chips, or GPUs, in 1999 helped fuel the growth of the gaming market and redefine computer graphics.

Last month, the Santa Clara, California-based tech giant replaced Intel in the Dow Jones Industrial Average, ending the pioneer semiconductor company’s 25-year run in the index.

Unlike Intel, Nvidia designs but does not manufacture its own chips, relying heavily on Taiwan Semiconductor Manufacturing Co., an Intel rival.

China’s antitrust probe follows a report this summer by tech news site The Information that the Justice Department was investigating complaints from rivals that Nvidia was abusing its market dominance in the chip sector.

The reported allegations include Nvidia threatening to punish those who buy products from both it and its competitors at the same time.