China ruled that Nvidia Corp. (NVDA) violated anti-monopoly laws with a high-profile 2020 deal, ratcheting up the pressure on Washington during sensitive trade negotiations.
The US chipmaker was found in violation of antitrust regulations after the acquisition of networking gear maker Mellanox Technologies Ltd., the State Administration for Market Regulation said after concluding a preliminary investigation. Nvidia’s shares fell about 2% in pre-market trading, while US stock index futures pared gains.
The surprise announcement emerged with US and Chinese officials heading into a second day of wide-ranging negotiations in Madrid over tariffs, which could shape the relationship between the world’s two largest economies. Nvidia has this year found itself at the center of those discussions, because of its central role in driving future technologies including artificial intelligence.
In December, Beijing opened a probe into Nvidia’s acquisition of Mellanox, taking aim at the world’s most valuable company. Beijing gave approval for the $7 billion acquisition deal four years ago, on condition Nvidia not discriminate against Chinese companies.
The US government then implemented regulations that banned Nvidia from selling its most advanced AI chips to Chinese companies, including the H100, because of what it called national security concerns. Nvidia redesigned its chips at least twice so they would comply with the American regulations and it could sell them into the country.
Monday’s initial ruling comes weeks after the US agreed to allow Nvidia and Advanced Micro Devices Inc. (AMD) to sell some of their sought-after AI chips to Chinese companies. However, Beijing has since pushed local companies and agencies to avoid Nvidia’s H20 accelerator, citing security concerns.
The regulator didn’t specify on Monday what sort of remedies it would seek. The agency said it will investigate further, without elaborating. Nvidia did not immediately respond to an emailed request for comment outside of regular office hours.
It’s unclear what impact the announcement would exert on talks in Madrid. The first day of negotiations lasted for almost six hours, according to a senior Treasury official, spanning topics from TikTok to trade and the global economy. Over the weekend, China also said it was launching an anti-dumping investigation targeting certain US-made semiconductors. Shares of American chipmakers including Texas Instruments Inc. fell in pre-market trading.
ByteDance Ltd.’s popular app faces a deadline this week to reach an agreement to ensure it continues operations in the US. Reuters earlier reported that the Trump administration is expected to again extend the deadline for TikTok divestiture.