Nvidia, the world's leading maker of AI and computer graphics chips, is set to be charged by French antitrust regulators for alleged anti-competitive practices. This marks the first significant enforcement action against the tech giant, underscoring the growing global regulatory focus on Nvidia's dominant market position.
The French antitrust watchdog's statement of objections follows dawn raids conducted in September last year targeting the graphics card sector, with sources confirming Nvidia was the primary focus. These raids stemmed from a broader inquiry into cloud computing, reflecting concerns over the burgeoning influence of Nvidia in the tech industry.
Nvidia's chips, especially its graphics processing units (GPUs), have become crucial for artificial intelligence (AI) applications, leading to a surge in demand following the launch of the generative AI application ChatGPT. This boom has, however, attracted regulatory scrutiny on both sides of the Atlantic, with the U.S. Department of Justice and the European Union also keeping a close eye on Nvidia's practices.
The French antitrust authority has highlighted potential abuses in the generative AI sector, pointing to Nvidia's CUDA chip programming software, which is the only system fully compatible with its GPUs. This dependency raises concerns about Nvidia's ability to stifle competition. Additionally, Nvidia's recent investments in AI-focused cloud service providers, such as CoreWeave, have further alarmed regulators.
"Regulatory bodies are increasingly wary of Nvidia's growing influence and the potential for market abuse," said a source familiar with the matter. "The company's dominant position in the AI chip market is seen as a threat to fair competition."
If found guilty of breaching French antitrust rules, Nvidia could face fines of up to 10% of its global annual turnover. However, the company could offer concessions to mitigate these penalties. In response to the allegations, Nvidia and the French authority have both declined to comment.
Nvidia's shares experienced a slight dip, falling as much as 3.8% in New York trading before recovering. The company has seen its valuation soar past $3 trillion this year, driven by its pivotal role in the AI revolution.
The French antitrust enforcers have been meticulously gathering information on Nvidia's market behavior, including its pricing policies and the ongoing chip shortage. The raid on Nvidia's offices aimed to uncover more details about potential abuses of its market dominance.
"Our position in markets relating to AI has led to increased interest in our business from regulators worldwide," Nvidia stated in a February filing. The company acknowledged that it is under scrutiny from officials in the U.S., European Union, China, and the UK.
The European Commission, although currently in an informal review phase, has yet to launch a formal investigation into Nvidia's practices. French Finance Minister Bruno Le Maire has been vocal about Nvidia's overwhelming market share, citing it as a source of "growing inequalities" and a hindrance to fair competition.
"If you want to have fair competition, you need to have many private companies and not one single company having the possibility of selling all the devices," Le Maire stated. He emphasized that 92% of GPUs are supplied by Nvidia, highlighting the need for a more balanced market landscape.
