AI giant Nvidia was investigated by antitrust, and its market value evaporated 250 billion yuan overnight. Where does it go in the future?

On June 6, there was news that US federal regulators had reached an agreement to allow an antitrust investigation against Nvidia. This news was like a bombshell, which quickly caused a huge shock in the tech world.

On June 6, local time, Nvidia's stock price crashed for a while, falling by about 6% from its highest point. By the close, Nvidia's stock price had fallen 1.18%, and its market capitalization had returned below $3 trillion. The market value evaporated overnight about US$35.5 billion (approximately RMB 257 billion), and was still falling after the market. Its market capitalization was immediately overtaken by Apple just 1 day after it surpassed Apple's.

From being a small chip design company to the invention of GPUs (graphics processing units), Nvidia quickly gained prominence in the gaming market. Subsequently, the CUDA platform and the Omniverse simulation platform were launched, further consolidating its leading position in the field of artificial intelligence.

However, the rise of Nvidia is inextricably linked to the development of artificial intelligence. Since the introduction of the GPT series of artificial intelligence models, Nvidia, as the main supplier of AI chips, has been one of the biggest beneficiaries of this revolutionary change. Around the world, major technology companies are competing to buy Nvidia's AI chips, making them almost monopolize the AI chip market and occupy 70% to 80% of the market share.

It is Nvidia's dominant position in the AI chip market, and its stock price has skyrocketed over the past year. As we can see through the BiyaPay App, a global multi-asset trading tool, Nvidia's stock price increased more than 2 times in 2023, and has risen 130.01% since this year.

However, just when Nvidia was in the limelight, the US government's antitrust investigation announcement suddenly hit.

In the US, antitrust investigations have always been the sword of Damocles on the heads of major companies. This sword is sharp and ruthless, regardless of industry or company size. As long as there is a suspicion of monopolizing the market, it may face severe investigation and punishment.

According to several US media sources, the US Federal Trade Commission (FTC) and the Department of Justice will launch antitrust investigations into Microsoft, Open AI, and Nvidia to examine the influence of these powerful companies in the artificial intelligence industry. The New York Times first reported on the investigation, and a person familiar with the situation also confirmed to CNBC that the investigation actually existed.

According to sources, the FTC will lead the investigation into Microsoft and Open AI, while the Department of Justice will focus on Nvidia, and the investigation will focus on the company's actions rather than merger and acquisition activities. The report said that the US Department of Justice and the Federal Trade Commission reached this agreement in the past week and is expected to be finalized in the next few days.

The agreement means that the US Department of Justice and the Federal Trade Commission are stepping up scrutiny of artificial intelligence. For some time, Nvidia, Microsoft, and Open AI largely evaded the impact of US government regulatory scrutiny, but that has begun to change.

“In the field of artificial intelligence, we need to identify potential problems at the beginning, rather than fix deep-seated problems many years later.” In February of this year, US Federal Trade Commission Chairman Lena Khan said so.

According to information, Nvidia is currently the most important independent GPU (graphics processing unit) manufacturer, and GPUs are currently the most important artificial intelligence chips. Take the Chinese market as an example. According to data from market consulting agency IDC, in 2023, the market size of Chinese accelerator chips reached nearly 1.4 million, and GPU cards accounted for 85% of the market share.

According to reports, the news of the upcoming antitrust investigation came a few days after a group of current and former Open AI employees issued an open letter on Tuesday. They expressed concern about the rapid development of the AI industry. Despite the lack of supervision, there was no whistleblower protection for those willing to speak out.

“AI companies have strong financial incentives to avoid effective oversight, and we don't think a customized corporate governance structure is enough to change that,” the employees wrote, adding that the company “currently has only a weak obligation to share some of this information with the government, and no obligation with civil society. We don't think they can all be trusted to share voluntarily.”

As of now, Open AI has not responded to requests for comment. Microsoft and Nvidia declined to comment.

In fact, antitrust investigations are not uncommon in US history.

At the beginning of the 20th century, Standard Oil was split because it monopolized the market; in the 1980s, AT&T was forced to abandon local telephone services because it prevented other companies from forming business ties with Bell Systems; in the 90s, Microsoft was eventually forced to change its commercial practices to ensure fair competition in the market due to bundling sales of operating systems and office suites. In 2024, the European Union issued more than 1.8 billion euros in antitrust fines against Apple, and Apple also faced the threat of US antitrust investigations. These cases show that once established, large companies that have gone through anti-monopoly investigations face either being split up or huge fines.

To determine whether Nvidia forms a monopoly, we need to comprehensively consider its market share, corporate behavior, and industry characteristics.

In terms of market share, Nvidia has a significant advantage in the field of AI chips, with a market share of over 80%. According to US antitrust laws, particularly the Sherman Antitrust Act and the Clayton Act, any act that restricts trade or commerce, or attempts to monopolize the market, is illegal.

However, a high market share alone is not sufficient to constitute monopoly behavior. It is also necessary to consider whether Nvidia is using its market position to engage in unfair competition, such as price discrimination, exclusive deals, etc. If Nvidia's market position is obtained through legal competition and technological innovation, and this position is not abused, then it does not constitute a monopoly. Conversely, if the investigation finds that Nvidia has unfair pricing, exclusive deals, or acts that prevent other competitors from entering the market, then it is likely to violate antitrust laws.

After news of the antitrust investigation came out, Nvidia's stock price fluctuated significantly, and at one point fell sharply by 6% on the same day. This fluctuation reflects investors' concerns about Nvidia's future development. Due to falling stock prices, Nvidia's market capitalization also shrunk drastically, losing tens of billions of dollars overnight after the news was announced. This rapid decline in market capitalization has dealt a blow to Nvidia's financial position and investor confidence. Furthermore, market sentiment has also been affected.

Investors are more uncertain about Nvidia's future development and the competitive landscape of the AI chip industry as a whole. This uncertainty has led to fluctuations in market sentiment, which in turn affects investors' decisions and Nvidia's stock price performance. If the investigation finds that Nvidia has monopoly behavior, it may face legal consequences such as fines and business restrictions. These consequences will directly affect Nvidia's long-term performance and share price performance. Even if the investigation ultimately did not reveal monopoly practices, the investigation process itself could have a negative impact on Nvidia's reputation and business operations.

AMD: As Nvidia's main competitor in the CPU and GPU markets, AMD will directly benefit from Nvidia's regulatory risks. AMD can take this opportunity to expand its market share and increase its influence in the high-performance chip market.

ARM: As a chip design company with an open source architecture, ARM's business model is different from Nvidia. However, ARM's partners, such as Qualcomm and Samsung, may increase the adoption of the ARM architecture due to Nvidia's regulatory risks, thereby indirectly benefiting ARM's business development.

First, the outcome of the regulatory action is unclear: Ultimately, the extent of the impact on Nvidia depends on specific measures and implementation, and whether AMD and ARM can actually benefit also depends on the circumstances.

Second, the market competition is fierce: Even if Nvidia is limited to a certain extent, its leading position in the AI chip market is still difficult to shake. If AMD and ARM are to truly achieve breakthroughs, they will need to continue to improve their competitiveness.

First, although Nvidia's stock split provided some support for its short-term stock price, the company's intrinsic value and market position will be decisive in the long run. Second, the dynamics of the technology stock market show that capital operations need to be analyzed in conjunction with the company's fundamentals in order to accurately grasp investment opportunities.

Facing the Nvidia stock split on the 10th, at this critical point, the market seems to have reached a consensus: the stock price rose before the stock split, but there may be a correction after the split. However, Nvidia's trend also seems to be silently following this market script.

According to data, the nominal value of Nvidia's short positions rose to US$34.4 billion, or about 1% of the company's total market value. This means that a significant amount of money is betting on Nvidia's stock split and then fell due to favorable cashing out. However, when expectations become consistent expectations, there are often huge variables, which is a historical law of the market.

But what we need to know is that Nvidia is no ordinary company. The split decision was carefully considered and fully communicated, and was widely recognized by the market. Sellers and subscribers are optimistic about this, and they see Nvidia's huge potential in the future. As far as institutional investors are concerned, they don't want to compete with retail investors for chips when the stock price is low after the stock split, so they may choose to increase their holdings early and wait to split their shares.

More importantly, within two weeks after the stock split, the market will usher in an important CPI data update and a decision on whether Nvidia will be included in the Dow Jones Index. These two major events will undoubtedly have a profound impact on the market. If the CPI data remains stable, tech giants will continue to be the focus of capital chase. And once Nvidia is successfully included in the Dow, it will mean that institutions must forcibly allocate it, which will provide strong support for the stock price.

As mentioned earlier, the decision to buy an underlying stock should be based on the company's fundamentals and long-term investment value, rather than short-term stock price fluctuations.

Nvidia's position in the AI chip market, strong R&D capabilities, and the continuous launch of new products all provide it with huge potential for growth. At the beginning of this new era, holding on to Nvidia must be a wise choice. After many years, those who went short will definitely regret it. They will lament that they haven't grasped the wealth in front of them. If they can go back to where they are, they won't hesitate to buy and hold.

After all, in this turbulent market, a company with such bright financial reports and clearly tells you that Q4 is about to release a new product and a new product that everyone is looking for, with a market share of nearly 90%, a little wind and waves will fool all future minority shareholders out of the market. Wouldn't it be a bit aggrieved? After all, there aren't many companies in the market that look as stable as Taishan, so don't miss out on the great opportunities right now.

As the man behind Nvidia, Hwang In-hoon, will face challenges from other chip companies in the future. Like Huawei, the company's strength in chip design should not be underestimated. The Ascend series AI chips developed by Huawei can already compete with Nvidia's AI chips in terms of performance. Without US process restrictions on chip manufacturers such as TSMC, Nvidia's position in the market could be even more challenged.

Finally, in the face of current antitrust investigations, Nvidia's future is full of uncertainty. Although Nvidia dominates the AI chip market, whether it constitutes a monopoly still needs to be thoroughly investigated.

In this era of rapid development, investors and industry players need to be highly sensitive to these changes to adapt to the changing market environment. When it comes to investing in technology stocks, it is necessary not only to pay attention to the financial performance of enterprises, but also to thoroughly understand technology development trends and regulatory policy trends. For the AI industry, how to balance innovation and risk management will be a challenge that all stakeholders must face next.