Making sense of market moves
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Nvidia has ascended from a tech company only nerds understood to household name status in just a few short years. But the company may have finally flown too close to the sun.
The chipmaker’s shares dropped 2.55% today after it became the centerpiece of the latest battle in the trade war between the US and China.
Chinese regulators announced that they are investigating Nvidia for antimonopoly violations. The State Administration for Market Regulation (SAMR) is particularly focused on the chipmaker’s 2020 acquisition of Israeli tech company Mellanox. The SAMR allowed the deal to go through on the condition that Nvidia not discriminate against Chinese companies—something the regulator argues it has done in light of the Biden administration’s policies to slow exports of semiconductor chips to China.
The US has been blocking American chipmakers, including Nvidia, from selling their most advanced chips to China over the past three years, and this is just the latest shot fired in an escalating global AI arms race. Incoming President-elect Donald Trump has vowed to slap aggressive tariffs on Chinese goods, potentially ramping up the trade war between the two countries in the near future.
Probe around the globe
While analysts argue China is using the antitrust case as retaliation against the Biden administration’s latest regulatory blockade, Chinese regulators aren’t the only ones questioning whether Nvidia’s dominance is aboveboard.
Earlier this year, the US Justice Department probed Nvidia for violating antitrust laws. France also investigated the tech company for antitrust violations over the summer, while the EU probed the firm in 2023 for similar allegations.
In spite of today's news, the vast majority of analysts still have a “buy” rating on Nvidia. The pros say it's unlikely that this investigation will change the fundamental investment thesis for Nvidia, especially since antitrust cases can take years to play out.
But it’s a reminder that when a stock has flown as high as Nvidia, any bad news sends investors scrambling in fear that it's finally getting burned.—LB