French antitrust regulators are preparing to charge Nvidia Corp. with allegedly anticompetitive practices.
TakeAway Points:
- Following an office raid last year, Nvidia (NVDA) is expected to face charges of anticompetitive behaviour from French antitrust regulators.
- Despite having more than doubled in value this year, Nvidia’s shares dropped 3.8% upon hearing the announcement, bringing its price past $3 trillion.
- Potential penalties might amount to as much as 10% of yearly global income; the US, EU, China, and UK are all currently under similar investigation.
Nvidia faces French Antitrust charges
This move marks the first instance of a regulatory body taking such a step against the world’s most valuable chipmaker. The charges are expected to follow a raid on Nvidia’s offices last year, which was part of a broader investigation into the graphics card sector.
Nvidia has been under increased scrutiny from regulators globally due to its dominant position in the artificial intelligence (AI) market. The company’s graphics processing units (GPUs) are highly sought after by data center operators for their ability to handle the large volumes of data required for AI model development. The French antitrust agency has been interviewing market players about Nvidia’s role in AI processors, its pricing policies, and the impact of chip shortages on prices.
The French antitrust agency and Nvidia both declined to comment on the matter. However, Nvidia acknowledged in a regulatory filing that it is being examined by officials in the US, European Union, China, and the UK.
“Our position in markets relating to AI has led to increased interest in our business from regulators worldwide,” Nvidia stated.
The Financial impact and response of the market
Following the news of the impending charges, Nvidia shares fell as much as 3.8% in New York trading before mostly recovering. Despite this dip, Nvidia’s stock has more than doubled this year, pushing the company’s valuation above $3 trillion. The potential fines for breaching France’s antitrust laws can be as high as 10% of a company’s global annual revenue. The French agency’s largest fine since 2011 was €1.24 billion ($1.33 billion), with €1.1 billion imposed on Apple Inc.
In Brussels, the European Commission has been informally gathering views on whether Nvidia may have violated its own antitrust rules, but it has not yet launched a formal investigation. French Finance Minister Bruno Le Maire has previously expressed concerns about Nvidia’s dominance, stating that it causes “growing inequalities” between countries and stifles fair competition. He noted that 92% of GPUs are from Nvidia, emphasizing the need for multiple private companies to ensure fair competition.
Global Regulatory Scrutiny
Nvidia’s business practices are under examination by regulators not only in France but also in the US, European Union, China, and the UK. The French watchdog has voiced concerns about the sector’s dependence on Nvidia’s CUDA chip programming software, which is the only system fully compatible with the GPUs essential for accelerated computing. Additionally, there is unease about Nvidia’s recent investments in AI-focused cloud service providers such as CoreWeave.
The U.S. Department of Justice is leading the investigation into Nvidia, sharing the scrutiny of Big Tech with the Federal Trade Commission. The French antitrust agency’s raid on Nvidia’s offices last year aimed to gather more information on potential abuses of dominance in the graphics card sector. The agency’s report on competition in generative AI highlighted the risk of abuse by chip providers, further intensifying the scrutiny of Nvidia.
