Nvidia Gets Slammed by China

By Douglas A. McIntyre Updated Sep 16, 1:08PM EDT · Published Sep 15, 6:35AM EDT

Quick Read

Chinese antitrust authorities have slammed Nvidia Corp. (NASDAQ: NVDA).
However, this action may not hurt much the chipmaker’s tiny sales in China.

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Nvidia Gets Slammed by China — © Slaven Vlasic / Getty Images Entertainment via Getty Images

After a year of ups and downs, Nvidia Corp. (NASDAQ: NVDA | NVDA Price Prediction) has been slammed by antitrust authorities in China. The decision could destabilize what is already an unsteady relationship with the world’s second-largest economy. It revolves around the buyout of Mellanox, a company Nvidia acquired in 2020. The price tag was $6.9 billion.

“The NVIDIA Mellanox end-to-end network management solutions enable monitoring, management, analytics and visibility, from the edge, to the data center and cloud,” according to the parent. Put in plain English, this means it makes data centers more efficient, which is a key function as data centers eat up more chips, more money, and more electricity. The Chinese government approved the deal based on an ongoing supply of its technology to local companies. Its new ruling says Nvidia did not keep up its end of the bargain.

The announcement came from the State Administration for Market Regulation. Nvidia has disclosed the risk. The world’s most valuable company has done everything it can to improve its footprint in China’s giant artificial intelligence (AI) market.

A Rock and a Hard Place

Nvidia’s China efforts have been bounced around by both the U.S. and Chinese governments. Recently, the Trump administration said it wanted 15% of Nvidia’s Chinese sales. Before that, there was government concern about Nvidia selling its most powerful AI chip to Chinese companies. These sales might help China best the United States in the war for AI supremacy. Nvidia was allowed to sell a less powerful chip called the H20.

Once the H20 deal seemed to be in place, Trump Commerce Secretary Howard Lutnick commented that the H20 was only Nvidia’s fourth most powerful chip, and it would give China little AI advantage. The Chinese government began to agitate for Chinese companies to use chips developed within the country. The government characterized Lutnick’s comments as an insult.

Nvidia CEO Jensen Huang recently said China sales would be unlikely to become a major part of the company’s revenue, at least in the short term. There was optimism that the H20 product deal would solve that.

The China antitrust action may not hurt Nvidia’s tiny Chinese sales, because there is a chance they would never amount to much.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.