Nvidia under scrutiny: DOJ intensifies antitrust investigation into AI | Festina Lente - Your leading source of AI news | Turtles AI

 The U.S. Department of Justice’s escalating antitrust investigation of Nvidia could have a significant impact on the AI chip market as the company faces legal challenges related to its dominance in the industry. The DOJ action follows allegations of anticompetitive practices that could limit customer choice and penalize those who do not exclusively use Nvidia chips.

Key points:

• Antitrust investigation: U.S. Department of Justice intensifies investigation of Nvidia, sending subpoenas to investigate possible anticompetitive practices.
• Market Domination: Nvidia holds 80 percent of the market for AI chips in data centers, but dominance could be threatened by the investigation.
• Effect on stock: Nvidia’s shares fell significantly, with a loss of more than 9 percent, after news of the investigation broke.
• Technology challenges: Production problems in the new Blackwell chips contributed to investor concerns, despite Nvidia promising a solution by the end of the year.

The U.S. Department of Justice recently stepped up an antitrust investigation against Nvidia, invoking subpoenas to gather evidence of anticompetitive practices. The investigation is aimed at finding out whether Nvidia has exploited its dominant position in the AI chip market to hinder competition and limit customer choices. Nvidia has reportedly been accused of making it difficult to switch to other suppliers by penalizing those who do not exclusively use its products.

The antitrust investigation launched by the U.S. Department of Justice (DOJ) against Nvidia is focusing on the company’s possible abuse of its dominant position in the AI chip market. The recent subpoenas sent by the DOJ to Nvidia and other companies in the industry are a significant step toward a potential formal complaint. This investigation aims to determine whether Nvidia is actually hindering competition and penalizing customers who choose not to use its chips exclusively by offering commercial advantages to those who stick with its products.

Nvidia currently holds about 80 percent of the AI GPU market, a position that has raised concerns among regulators and competitors. Among the allegations is the alleged use of tactics that include pressuring cloud service providers to purchase Nvidia products exclusively and charging higher prices on other equipment if customers decide to purchase chips from competitors such as AMD or Intel. Also being examined is whether Nvidia’s acquisition of companies such as RunAI may be an additional barrier to customers attempting to switch to competing technologies.

The investigation, which is drawing international attention, also extends to other countries, such as France, where Nvidia is under scrutiny for the predominant role of its CUDA software platform, which is needed to take full advantage of its AI chips. In the context of this situation, Nvidia continues to defend its position, attributing its success to innovation and product quality.

Despite ongoing challenges and investigations, Nvidia continues to be a key player in the technology sector, with projected revenues for 2024 that could exceed $120 billion, thanks in part to high demand for its AI processors. However, news of the escalating investigation had a significant impact on the company’s stock, which fell more than 9 percent in a single day, wiping some $279 billion off its market value.

The market reacted negatively to the news, with Nvidia’s shares dropping significantly, losing 9.5 percent of their value in a single day, wiping out about $279 billion in capitalization. This drop represents Nvidia’s largest daily loss in years, in an environment already marked by uncertainties due to production problems with the next-generation chip, Blackwell. Despite this, Nvidia continued to grow in 2024, fueled by rising demand for AI, with revenue up 141 percent year-over-year.

As the investigation continues to unfold, the long-term effects of these allegations on Nvidia and the entire AI industry remain to be seen. The affair represents a pivotal moment for the global technology industry, with potential implications that could affect the availability and development of AI technologies worldwide.

Nvidia’s future is now at the center of a major legal and market battle, the outcome of which will be closely watched by investors and competitors alike.