NVIDIA Corporation (NASDAQ: NVDA)’s rally has predominantly been positive throughout the year, surging approximately 200% year-to-date.
From mounting AI chip demand to its stellar earnings report and spectacular innovations like the Blackwell architecture, the stock’s momentum has been nothing short of exceptional.
Nevertheless, things took a turn today when the stock plunged more than 2% after a regulator in China said it was investigating the darling chipmaker over possible violations of the country’s antimonopoly law.
The Chinese government said that The State Administration for Market Regulation (SAMR) has initiated an investigation into NVIDIA Corporation (NASDAQ: NVDA) regarding its acquisition of Mellanox and some agreements made during the acquisition.
Mellanox Technologies, Ltd. is a fabless semiconductor company that Nvidia acquired back in 2020. Since both companies have significant operations in China, the acquisition required approval from Chinese antitrust authorities. Conditions on Nvidia and the merged entity’s China operations included prohibitions on forced product bundling, unreasonable trading terms, purchase restrictions, and discriminatory treatment of customers who buy products separately.
In particular, China’s competition authority had approved the $7 billion takeover on the premise that rivals be notified of new products within 90 days of allowing Nvidia access to them. As such, the probe will investigate whether Nvidia failed to notify Chinese firms of the new Mellanox products within 90 days, as stipulated by SAMR’s approval conditions.
“In recent days, due to Nvidia’s suspected violation of China’s anti-monopoly law and the State Administration for Market Regulation’s restrictive conditions around Nvidia’s acquisition of Mellanox shares … the State Administration for Market Regulation is opening a probe into Nvidia in accordance with law”.
-According to a statement translated by CNBC.
Nevertheless, analysts state that the probe may not likely have much impact.
“It’s (the probe) unlikely to have much of an impact on the company, particularly in the near term, because most of Nvidia’s most advanced chips are already restricted from being sold into China”.
-Bob O’Donnell, chief analyst at TECHnalysis Research.
The news comes amidst escalating tensions between China and the US over chip-making capabilities. On December 2nd, the Biden administration announced some final restrictions on exports of semiconductor chips and chip-making equipment to China.
The news could also be a response to President-elect Donald Trump’s preparations to take office in January as he gears up to slap hefty tariffs on foreign goods.
Last week, China’s commerce ministry said it would halt shipments of key materials needed for chip production to the US, stating how the measures are in response to US chip export bans.
Our research director shared his views on NVDA’s earnings results here. He thinks NVDA stock can reach $170 within 3 months. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
