Nvidia faces up to a $1 billion sanction risk for violating China's Anti-Monopoly Law, with a new phase of GPU supply restrictions and escalating tensions between the USA and China.

Nvidia is under investigation for violating antitrust laws by the State Administration for Market Regulation (SAMR) in China. This investigation is related to the company's acquisition of Mellanox Technologies in 2019, with Beijing focusing on the non-compliance of the approved supply obligation. Export restrictions from the USA, particularly the significant GPU supply limitations to the Chinese market, are being scrutinized.
If violations are confirmed, Nvidia could face fines of up to $1.13 billion, equivalent to 10% of its revenue in China. This would be the largest antitrust penalty in China's history, likely influenced by US-China trade tensions. Amid intensifying competition in AI and high-performance computing, Nvidia's actions will be a significant indicator of the future of the global semiconductor market.

Nvidia's acquisition of Mellanox Technologies is one of the cases approved by the Chinese government with conditions. These conditions required 'fair, reasonable, and non-discriminatory' supply in the Chinese market, as well as ensuring compatibility with other companies' hardware. However, what SAMR has raised concerns about was Nvidia's restriction of advanced GPU supply in compliance with US export regulations, which is considered a violation of the conditions.
The reexamination of past approval cases by China is believed to conceal a strategic intent to secure national interests around semiconductor technology. Particularly, amid the focus on competitive advantage in AI and high-performance computing between nations, Beijing is strengthening its stance to eliminate barriers to technological progress. This increases the risk of legal uncertainty faced by companies inside and outside China.
This situation could worsen the investment environment for foreign companies. Conditional approval inherently leaves room for future regulatory changes, requiring particularly careful handling of transactions in strategic areas. Nvidia must deeply understand the complex legal system and economic pressures of the Chinese market in this regard.

The issues Nvidia is facing are not just limited to legal disputes between companies. Behind this is a serious trade friction between the USA and China, and the battle over semiconductor technology export regulations is intensifying. The USA, citing reasons of national security, has severely restricted exports to China of AI and high-performance computing technology, which has had a significant impact on Nvidia's business strategy.
The Chinese government views this as an act that hinders its own technological development and has strengthened its antitrust laws in response to US regulations. This move is seen to bring new risks to foreign companies including Nvidia, but at the same time, it is also believed to aim to promote technology development within China. The possibility of China imposing the largest fine in history on Nvidia is also thought to support the competitiveness of domestic companies.
These circumstances pose a risk of spillover effects on the entire semiconductor market supply chain. In particular, companies dependent on both the USA and China must have essential risk management in place to cope with sudden changes in regulations and market conditions. Unless the tension between the two countries is eased, the global semiconductor market may face further turmoil.

While Nvidia has established a dominant position in the GPU market, this antitrust investigation poses a new challenge for the company. Especially in the Chinese market, a significant source of revenue in AI and high-performance computing fields, losing ground here could have a significant impact on long-term growth.
Furthermore, criticisms towards the management team, including CEO Jensen Huang, can also impact the company's image. According to reports by the New York Times, Huang is alleged to have avoided significant tax burden, which could shake the trust from shareholders and the market. These aspects of the management should also be closely monitored as part of the challenges Nvidia faces.
In the face of such headwinds, how Nvidia will rebuild its strategy is attracting attention. While maintaining market trust, it is necessary to rebuild the relationship with the Chinese market, requiring diplomatic adjustments and flexible responses to new regulations. The company's future developments will likely serve as indicators for the entire semiconductor industry.

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