China's market regulator said Monday that a preliminary investigation had found Nvidia violated the country's anti-monopoly law, escalating a widening trade confrontation with the United States as top officials meet in Madrid to discuss tariffs and technology restrictions.
The State Administration for Market Regulation (SAMR) said Nvidia breached conditions tied to its 2020 conditional approval of the acquisition of Israeli chip designer Mellanox Technologies. The regulator said it would continue its investigation but did not detail the violations. Under China's antitrust law, companies can face fines of between 1% and 10% of annual sales. Nvidia generated $17 billion in revenue from China in its last fiscal year, or about 13% of total sales, according to its annual report.
Nvidia shares fell 2.1% in premarket trading after the announcement. Analysts said the timing of the statement, coinciding with the fourth round of U.S.-China trade talks in Madrid, suggested Beijing is using the probe to gain leverage. "Both sides appear to be building leverage to negotiate from a more favorable position, but they are doing this through very calculated moves because they understand the stakes at play," said Alfredo Montufar-Helu, managing director at advisory firm GreenPoint.
Zhengyuan Bo, partner at research firm Plenum, said the move was likely a response to the Trump administration's decision Friday to place 23 Chinese companies on a U.S. trade blacklist. "It's a warning that if the U.S. export control paradigm operates in the same way as in the past several years there will be consequences, and China is willing to inflict damage on U.S. companies," Bo said.
The announcement could complicate Nvidia CEO Jensen Huang's efforts to expand business in China. Huang has traveled to the country three times this year and struck a deal with President Donald Trump last month to pay 15% of revenues from semiconductor sales to China in exchange for export licenses for modified AI chips. Huang is scheduled to meet Trump again this week during the president's visit to the United Kingdom.
The probe also underscores the central role of artificial-intelligence chips in the U.S.-China rivalry. The White House earlier this year blocked exports of Nvidia's H20 chip, designed for the Chinese market, but Trump's agreement with Nvidia and AMD last month reopened sales of stripped-down versions of those chips. Still, China's state-linked media outlets have questioned the security implications of using them, and regulators have summoned Tencent and ByteDance to justify purchases of Nvidia chips, citing privacy concerns.
China launched its investigation into Nvidia in December, a move widely interpreted as a retaliatory response to U.S. export controls. While SAMR's decision does not appear to signal a ban on Nvidia's GPUs, analysts warn the regulator could impose conditions requiring Nvidia to sell chips without Mellanox technology or face fines that could total billions of dollars.
Plenum's Bo said that China's larger strategic aim is not to eject Nvidia from the market but to foster domestic alternatives. "This should not be taken as a sign that China is trying to kick Nvidia out of the country," he said, though the ruling highlights the growing headwinds for U.S. tech firms seeking access to China's vast AI sector.
