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France Is Preparing Antitrust Against NVIDIA: Why It Won't Collapse NVIDIA's Stock Price

Eric Bleeker

Published: July 4, 2024 9:00 pm

France is preparing antitrust regulations against NVIDIA (NASDAQ: NVDA), that might sound scary to investors as antitrust actions have tied up some of technology’s largest companies in the past. However, we dive into why France has little leverage against NVIDIA and is ultimately causing more harm to itself than it could do to NVIDIA. 

Why France Will Lose If it Charges NVIDIA With Antitrust

Here are some of the highlights from the discussion between 24/7 Wall Street Analysts Eric Bleeker and Austin Smith.

• Reuters is reporting that France is preparing to charge NVIDIA with anti-competitive practices.  
• France has been more aggressive on the regulation front. For example, it conducted dawn raids on GPUs last September. These raids were widely seen as targeting NVIDIA. 
• NVIDIA has disclosed authorities in the EU, France, and China are seeking more information from the company in antitrust investigations. 
• However, while the EU isn’t likely to expand its investigation in the near term, it looks as if France will. 
• Reuters sources say that France is focusing on CUDA, which is the software platform for NVIDIA’s chips. 
• And also the company’s investment in CoreWeave. CoreWeave is a GPU-focused cloud services company that NVIDIA has invested in and on May 1st disclosed its valuation had soared to $19 billion in a recent funding round. 
• What’s at stake: France can fine companies for “10% of global turnover.” Obviously, that’s a worst-case outcome and companies can negotiate and limit services to not receive penalties this punitive.  
• Finally, it’s worth noting that the US is also investigating with the DoJ taking the lead, but every tech company is being investigated currently so this is no surprise. In fact, it would be more weird if NVIDIA wasn’t being studied by officials in the U.S., and we’re not overly concerned by this development. 
• Here’s the bottom line when it comes to France’s actions: NVIDIA can leave the country with little consequence. They would potentially lose some gaming revenue and some inference revenue, but AI training is NVIDIA’s strongest market and it’s unlikely to be impacted in any significant way if the company had to exit the French market. 
• France has no real recourse in this matter. 
• Zooming further out, Europe has a larger issue around AI regulation. One notable example is Apple choosing to withhold Apple Intelligence from the continent at launch. 
• The bottom line is advancement in artificial intelligence could be extremely important to France’s technology sector’s long-term viability. By regulators picking a fight with NVIDIA they’re risking more damage to themselves than NVIDIA will receive.

Transcript:

Eric, it feels like if the story for investors the last few years has been AI, the story for regulators has been antitrust, not just in the US, but also in Europe with a lot of landmark antitrust cases landing on some major mega cap tech companies’ doorsteps.

So we recently saw that France is preparing antitrust regulations against NVIDIA.

What’s going on?

Does this actually affect the company?

Is France a big market?

Give me the whole picture here.

Yeah, and you know, this report comes from Reuters, so it’s a very, very credible source.

And it is that France is preparing to charge NVIDIA with anti-competitive practices.

France has been more aggressive on the regulation front.

They conducted dawn raids on GPUs last September in kind of an action that was broadly seen as targeting NVIDIA.

And they’re one of three entities, along with the EU and also China, that NVIDIAhas disclosed, has asked the company for more information in its regulatory investigations.

Now, it appears that while the EU is unlikely at this time to expand its investigation, France will.

And their focus is on CUDA, which is the software platform for NVIDIA’s chips, and also the company’s investment in CoreWeave, which is a cloud computing company mainly focused around GPU services.

So what’s at stake is France can find companies for 10% of global turnover.

And finally, I should add the US is also investigating with the DOJ taking the lead.

But Austin, as you alluded to at the beginning of this, every tech company is being investigated right now.

So this is no surprise.

So here’s the bottom line.

I don’t think NVIDIA investors need to lose one wink of sleep over this because NVIDIA can leave France with relatively little consequence.

Its training revenue shouldn’t be impacted in France, it may be, but that’s of little consequence.

It’s a rounding error.

And France as a country has no real recourse in this matter.

I should note that AI in Europe, NVIDIA is not alone.

AI has been the subject of way more scrutiny there.

Apple’s not even releasing its new Apple Intelligence there at the outset.

And the bottom line, Austin, is this is a move that will only hurt France in the long run and has little bearing on NVIDIA  because if they lead to a situation where NVIDIA chips aren’t in the country, it’s only going to hurt their industry.

So, you know, I think this is what you call a pyrrhic victory for regulators.

If you’re an NVIDIA investor, this is essentially a rounding error where the worst-case scenario is they would rather exit the market than have to bear with them.

Yeah, I appreciate you bringing some clarity to this because in many ways it feels like Europe’s tendency is going to be to over-regulate tech.

And we’ve seen them go after companies like Google and Facebook and Microsoft.

Sometimes it’s more meaningful and sometimes it’s not.

Sometimes these antitrust fines and regulations can be easy to brush up.

In some cases, like if you’re Apple, it might delay your release of product like Apple Intelligence, which is largely seen as the main driver of the new iPhone 16 sales trend.

So it is important to put these into the right context.

Some of these antitrust and regulations matter from Europe, some of them don’t.

Now what’s also really interesting is I’m a little confused by Europe’s sort of reluctance to embrace AI here.

If you think about companies like ASML and some of the greatest AI research has actually come out of France and other European countries.

I forget the commission’s name that has done a lot of, the nonprofit has done a lot of AI research.

France itself has some really impressive AI companies.

So I don’t quite understand Europe’s collective stance towards AI here.

It feels like this is one of the rare technologies where they have enough advancement where they could embrace this.

And this really could become a hallmark of European economies.

But instead, we’re seeing regulation and antitrust slowing down the release of Apple products.

And France is maybe fighting for a pyrrhic victory here against NVIDIA.