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The artificial intelligence boom has been transformative for Nvidia, which has become the third-most-valuable company in the world just behind Apple and Microsoft. That’s a bronze-medal performance. (We can make Olympics references for another week, folks.)
Nvidia’s chipmaker’s graphics processors and data centers are integral for anyone and everyone who wants to train or run a generative AI model. That’s true for teams at Silicon Valley giants and upstarts alike. And Nvidia is the clear market leader: By one estimate, Nvidia now controls 80% of the market for AI-grade chips and data centers, far ahead of rivals AMD and Intel.
Naturally, Nvidia’s market dominance has begun to attract scrutiny from antitrust authorities in the US, its home country, and around the world. The semiconductor giant now faces multiple antitrust probes, raising questions about whether its acquisitions and competitive practices have been fair.
The US Department of Justice is reportedly investigating the company in two separate probes: First, it’s looking into whether Nvidia’s $700 million attempted acquisition of Run:ai, an Israeli AI startup, would be anticompetitive. Second, it’s investigating complaints from competitors that Nvidia is abusing its market power. If the government sues, it could seek to block the acquisition, or demand changes to how Nvidia conducts its business.
Diana Moss, vice president and director of competition policy at the Progressive Policy Institute, says that while these investigations are significant, it’s hard to discern whether charges will be filed since such decisions are dependent on what investigators learn. She said success in business alone isn’t enough to be dinged by antitrust regulators. “The key question is about the pathway to success,” she wrote in an email. “Commercial success on the merits, i.e., by being lower cost or more innovative, draws less antitrust attention than success based on squeezing out rivals and raising prices. Antitrust enforcement targets the latter.” (For example, just yesterday, a federal judge found Google liable for abusing its own monopoly power in the online search business by cutting deals with phone suppliers like Apple and Samsung to make the Google search engine the default experience.)
The investigations into Nvidia come at a time when the US government has been actively supporting the domestic semiconductor industry through initiatives like the CHIPS Act and boxing out China through stringent export controls. But boosting the chip industry and scrutinizing one of its leaders aren’t necessarily at odds.
“The CHIPS Act is focused on the manufacturing segment of the supply chain, not necessarily designers like Nvidia,” said Xiaomeng Lu of Eurasia Group. Lu views both the support for the chip industry and the antitrust probes as “moves designed to shape the industrial landscape in a way favorable to [the] government’s strategic goals.”
Moss adds that antitrust enforcement operates somewhat independently of these other economic and national security policy priorities. “I don’t see the current administration pressuring enforcers to exercise prosecutorial discretion to stand down on enforcement regarding large US national champions,” she said.
Even if the US decides to bring a case against Nvidia, its leading chip designer, that doesn’t mean it’s going to go easy on China. “The possibility of being held liable for antitrust violations doesn’t mean ceding the field to China, any more than Microsoft being ordered to level the playing field for rival browsers and other third-party software was a fatal blow to that company,” said Mitch Stoltz, head of the antitrust working group at the Electronic Frontier Foundation.
Lu suggests that from the DOJ’s perspective, “limiting the dominant player’s power will foster more innovation and allow the emergence of a host of AI chip companies who can outperform their Chinese counterparts.”
Scott Bade of Eurasia Group points out that this dilemma is not unique to the chip industry. “It’s worth noting that this is also a common refrain with almost all tech-focused antitrust. If you want a national champion, don’t go after your leading contenders,” he said. “But the FTC has different priorities than Commerce and an independent mandate.” (The Commerce Department handles export controls as one of its many duties.)
Stoltz strongly argues against the idea of protecting “national champions” from antitrust scrutiny. “Monopolists are prone to mistreating consumers, mishandling people’s private information, and working closely with authoritarian governments no matter what country they’re located in,” he asserts.
“Building homegrown monopolists that are too big to regulate effectively isn’t ultimately any better for consumers and society than ceding the field to foreign companies with close ties to authoritarian regimes,” Stolz adds.
The decision to focus on Nvidia isn’t that of the United States alone. The French government is expected to charge the company with antitrust violations, while it’s disclosed that the UK, Europe, and China are also examining its practices.
Nvidia’s ability to weather these storms could determine how much of a foothold direct competitors can gain in the AI chip industry. Nvidia feels its market dominance has been earned and deserved, but one abuse of that monopoly power and regulators will look to take it down a peg — no matter what that means for the global chip race.