• China's market regulator alleges Nvidia violated antitrust laws in its $6.9 billion acquisition of Mellanox Technologies.
  • The probe, announced as US-China trade tensions remain high, sent Nvidia shares down roughly 2.5% in pre-market trading.
  • The investigation could result in significant fines and new operational restrictions for Nvidia in one of its largest markets.

China’s State Administration for Market Regulation (SAMR) has formally opened an antitrust investigation into Nvidia Corp., alleging the chipmaker violated the country’s Anti-Monopoly Law in its 2020 acquisition of Mellanox Technologies Ltd. The probe, which follows a preliminary review, centers on conditions set during the $6.9 billion deal's approval, specifically regarding ensuring interoperability with rivals and not engaging in anti-competitive bundling practices.

The announcement comes at a delicate time, as trade officials from the US and China are engaged in ongoing talks. The move is widely interpreted as a strategic counterpunch to recent US efforts to clamp down on semiconductor exports to China. Just this year, new US export restrictions are expected to deal a $5.5 billion blow to Nvidia’s first-quarter earnings, primarily by limiting sales of its high-end AI chips to the Chinese market.

Nvidia’s shares fell approximately 2.5% in pre-market activity following the news, reflecting investor jitters over the company’s deepening regulatory challenges. China accounted for roughly $17 billion, or about 13%, of Nvidia’s global revenue in its last fiscal year, making any threat to its operations there a significant concern for shareholders.

According to people familiar with the regulator’s thinking, the investigation could lead to substantial financial penalties and potentially force Nvidia to accept new, more stringent operational conditions for its business in China. The company did not immediately respond to a request for comment on the announcement.

The Mellanox acquisition, which closed four years ago, was critical to Nvidia’s strategy of expanding beyond graphics chips into high-performance networking for data centers. It was approved by Chinese regulators at the time, but with specific stipulations designed to protect market competition. SAMR’s new action suggests authorities believe those conditions were not adequately met.

This is not the first time Nvidia has found itself caught in the crossfire of US-China tech competition. The company’s previous attempt to acquire UK-based Arm Ltd. was abandoned in 2022 following significant regulatory pressure from multiple governments. For now, the market is watching to see if this probe remains a targeted enforcement action or escalates into a broader campaign against foreign semiconductor firms, a playbook China has used with other US companies like Micron and Qualcomm in the past.