Antitrust investigation escalates: Nvidia receives subpoena from US Department of Justice

Author: Ian King, Leah Nylen, Bloomberg; Translator: Baishui, Golden Finance

The U.S. Department of Justice has issued subpoenas to Nvidia and other companies seeking evidence that the chipmaker has violated antitrust laws, escalating its investigation into the main supplier of artificial intelligence processors.

The U.S. Department of Justice has previously issued questionnaires to companies and is now sending legally binding requests to the companies, asking the recipients to provide information, according to people familiar with the matter. This brings the government one step closer to launching a formal complaint.

Nvidia Chief Executive Officer Jensen Huang said he prioritized customers who can use the company's products now. Photographer: Annabelle Chih/Bloomberg

Antitrust officials are concerned that Nvidia will make it more difficult for suppliers to switch to other suppliers and punish buyers who don't use its artificial intelligence chips exclusively, according to people familiar with the matter who asked not to be named.

Nvidia shares plunged $279 billion to a record on Tuesday. The company's shares fell further in late trading after Bloomberg reported the subpoena. Still, the company's shares have more than doubled this year, driven by exploding sales at the Santa Clara, California-based chipmaker.

As part of the investigation, Bloomberg previously reported in June that investigators have been contacting other technology companies to gather information. The Justice Department's San Francisco office is leading the investigation, people familiar with the matter said. A representative for the Justice Department declined to comment.

In response to questions about the investigation, Nvidia said its market dominance stems from the quality of its products, which provide faster performance.

"Nvidia wins on strength, as reflected in our benchmark results and value to customers, who can choose the solution that works best for them," the company said in an emailed statement.

Nvidia has been under regulatory scrutiny since it became the world's most valuable chipmaker and a major beneficiary of the AI ​​spending boom. Sales have more than doubled each quarter and surpassed one-time chip leaders such as Intel.

Alongside the Justice Department’s probe, regulators have been looking into Nvidia’s acquisition of RunAI, a deal announced in April. The company makes software for managing AI calculations, and there are concerns that the partnership will make it harder for customers to switch from Nvidia chips. Regulators are also asking whether Nvidia offers preferential supply and pricing to customers who use its technology exclusively or buy its complete systems, according to people familiar with the matter.

Founded in 1993, Nvidia made its name by selling graphics cards to computer gamers. But its chipmaking methods ultimately proved useful for building AI models, a process that involves bombarding software with data. The company has also rapidly expanded its product line to include a range of software, servers, networking and services — all designed, Nvidia argues, to speed up the deployment of AI.

Nvidia Chief Executive Officer Jensen Huang has said he prioritizes customers who can use the products he offers immediately in existing data centers, a policy designed to prevent hoarding and speed broader adoption of AI.

The success of Nvidia’s products, and the struggles of rivals to come up with alternative chips, has made the company a key link in the supply chains of some of the world’s largest companies. Microsoft Corp. and Meta Platforms Inc., for example, spend more than 40% of their hardware budgets on Nvidia gear. At the height of the shortage of Nvidia’s H100 accelerators, a single component retailed for as much as $90,000.

Analysts expect Nvidia’s revenue to grow to $120.8 billion in 2024 from $16 billion in 2020, with much of that coming from the data center unit. In fact, Nvidia’s profits this year are expected to exceed the total sales of its closest rival, Advanced Micro Devices Inc.

There are also broader regulatory issues surrounding Nvidia’s approach. Access to AI capabilities has become a focus for governments around the world as the technology becomes increasingly important to economic power and national security.