Market share exceeds 90%! NVIDIA has become a "thorn in the eye" of regulators in various countries, and the new acquisition case may be investigated

The AI ​​boom has made NVIDIA the new darling of the tech industry. Data shows that by the end of last year, NVIDIA's AI chip sales accounted for over 90% of the global market.

However, this has unsurprisingly attracted the attention of regulators in various countries. According to NVIDIA's financial documents, regulatory authorities in the European Union, the United Kingdom, and China have requested information from the company regarding its important chip sales, supply allocation, and investments in other companies.

Sources revealed to the media that the U.S. Department of Justice has also begun investigating NVIDIA's sales practices and will review the company's recent acquisition.

Media reports indicate that NVIDIA is not yet prepared to face this scrutiny and is currently busy establishing the necessary teams and offices to address regulatory reviews. Last year, NVIDIA began looking for an office in Washington and hired four public policy staff. This year, the company added its first in-house competition lawyer to complement the legal team that has been dealing with antitrust issues for the past decade. The company has also started formulating strategies to address government scrutiny.

Analysts believe that NVIDIA's urgent response indicates that the company must resolve this issue in a short period to avoid the regulatory challenges faced by other tech giants. Previously, Google, Apple, Amazon, and Meta had at least a decade to establish complex government operations in Washington before facing antitrust lawsuits. On Monday, a federal judge ruled that Google had abused its monopoly position in internet search, violating antitrust laws.

Overinflated?

NVIDIA's quarterly profit has increased ninefold in the past two years, reaching $14.88 billion. Currently, NVIDIA has become the world's third-largest tech company by market capitalization, behind only Apple and Microsoft, with a market value of around $2.5 trillion.

However, this rapid rise leaves NVIDIA with little room for error. On Monday, reports surfaced that NVIDIA had delayed the shipment of its latest AI chips by three months, causing the company's stock price to drop by over 6%. There is also growing skepticism about the potential of AI to transform business.

NVIDIA currently dominates the GPU market, but demand for these chips exceeds NVIDIA's production capacity. Therefore, antitrust agencies are concerned about how NVIDIA allocates this scarce but crucial technology.

Daniel Newman, CEO of Futurum Group, stated, "Regulators want to know if NVIDIA is exerting influence in transactions, or if the products themselves are so excellent that they can sell without additional promotion." He added, "While there is no evidence that they are engaged in monopolistic or anti-competitive behavior, these conditions exist due to their market leadership."

Media reports indicate that NVIDIA plans to respond to growing antitrust concerns on a case-by-case basis as requested by the government. The company stated that its business practices are fair and comply with competition laws.

NVIDIA spokesperson Ken Brown said, "Regulators have nothing to worry about, but we are willing to provide any information regulators need."

Lobbying in Washington

As government scrutiny of its business increases, NVIDIA is slowly building its government relations operations in Washington. According to data from the government transparency organization Open Secrets, seven lobbyists work for the company Other tech giants - Apple, Amazon, Google, Meta, and Microsoft - have had offices in Washington for at least a decade. Each company has between 55 and 125 lobbyists working on various issues, including trade, taxation, antitrust, and patents. Apple CEO Tim Cook and Microsoft President Brad Smith regularly visit Washington to meet with lawmakers. They also travel to Europe to meet with antitrust regulators.

Prior to last year, NVIDIA CEO Jensen Huang rarely visited Washington. However, his activities in the capital have significantly increased since last year. Last summer, Huang met with Secretary of State Antony Blinken and Commerce Secretary Gina Raimondo along with the CEOs of Intel and Qualcomm.

New Acquisitions May Face Investigation

This year, some in the tech industry have begun to complain about NVIDIA's dominant position in the AI market, causing concerns in Washington. Complaints have increased as NVIDIA gains more control over key parts of the AI supply chain. The company provides cables and switches that control high-performance computers, software that manages data center performance, and the CUDA programming language for developers to control NVIDIA chips.

In 2020, NVIDIA spent $7 billion to acquire Mellanox, a manufacturer of high-speed cables and switches used to transfer data for AI systems. Two years later, the company introduced its own central processing unit (CPU) to enhance GPU performance. Sources have told the media that by bundling products for cloud computing providers and server manufacturers, NVIDIA has more pricing flexibility and power compared to its competitors.

Today, NVIDIA faces another challenge to its acquisition plans. The company had previously proposed a $700 million acquisition of Run.ai, a startup that controls AI system scheduling. However, sources have revealed to the media that the Department of Justice plans to review this transaction and investigate NVIDIA's business practices.

Daniel Newman of Futurum Group stated, "NVIDIA has received its welcome party invitation from regulators. The review will be substantive, frequent, and endless."