A Chinese regulator has found that Nvidia violated the country's antitrust law, in a preliminary finding against the world's most valuable chipmaker, Reuters reported.
Nvidia had not fully complied with provisions outlined when it acquired Mellanox Technologies, an Israeli-US supplier of networking products, China's State Administration for Market Regulation (SAMR) stated on Monday, according to Reuters. Beijing provided conditional approval for the US chipmaker's acquisition of Mellanox in 2020.
Monday's statement was released as US and Chinese officials were conducting more trade talks in Madrid, with a tariff truce between the world's two biggest economies scheduled to expire in November, Reuters noted.
Two individuals with knowledge of the situation said SAMR arrived at its conclusion weeks before the announcement on Monday, adding that the regulator released the statement at this time to provide China with greater leverage in the trade discussions.
The regulator initiated the anti-monopoly investigation in December, one week after the US revealed stricter export controls on advanced high-bandwidth memory chips and the equipment for making chips sent to the country.
SAMR subsequently spent months interviewing relevant parties and collecting legal opinions to formulate the case, the people stated.
In 2020, Nvidia purchased Mellanox for $6.9bn, and the acquisition assisted the chipmaker in advancing into the data center and high-performance computing market, where it is currently a dominant player.
The preliminary findings against the chipmaker could lead to fines between 1% and 10% of the company's sales from the preceding year. Regulators also have the authority to compel Nvidia to modify business practices that are deemed to be in violation of antitrust laws.
A statement from Nvidia said it complies "with the law in all respects" and would continue to co-operate with all relevant government agencies.
Over the past few years, Nvidia has risen to become a global market leader in artificial intelligence chips, with its graphics processing units (GPUs) being critical in the development of leading AI models.
This has also meant that Nvidia has become more and more entangled in the trade tensions between Washington and Beijing.
US Treasury Secretary Scott Bessent, who spoke at the Madrid talks on Monday, said the regulatory finding against Nvidia was a topic in the meetings.
"We discussed the poor timing of the Nvidia investigation [on] the day of these talks," his comment was, as cited by Reuters.
Successive administrations in the US have put in place export controls that have required Nvidia to sell less powerful versions of its essential graphics processing units in China, creating a large black market of smugglers who illegally transport its more advanced processors into the country.
The US this year also prevented sales of the H20 chip, which Nvidia created for the Chinese market while following export controls. The company later made a deal to let sales resume in return for giving the US government 15% of the revenues.
Despite this, Chinese regulators have been putting pressure on the nation's tech companies, warning them against buying Nvidia's H20 chip, which has created uncertainty over the US group's business in the country.
Nvidia Chief Executive Jensen Huang, who has frequently visited China in a display of his commitment to a vital overseas market, has criticized the US curbs, calling them a "failure" that has motivated Chinese competitors to speed up the development of their own products, according to Reuters.
