China opens investigation into Nvidia over potential antitrust violations

China’s anti-monopoly regulator announced Monday that it was investigating potential violations of antitrust law by Nvidia, the U.S. company that makes a vast majority of the computer chips that power artificial intelligence systems.

The inquiry, a rare move by Beijing, comes a week after the Biden administration expanded curbs on the sale of advanced U.S. technology to China. In the days since, the Chinese government announced that it would ban the export of several rare minerals to the United States and imposed sanctions on more than a dozen U.S. defense firms and defense industry executives.

Together, the moves by Beijing signal its willingness to engage in supply chain warfare as the policy contest over trade and the control of technology escalates between the world’s two largest economies.

The battle has made AI chips into one of the world’s most sought-after technologies, and Nvidia has cornered the market, accounting for 90% of global sales by the end of last year. Nvidia’s dominance helped it become one of the most valuable companies in the world over the past year.

China’s State Administration for Market Regulation said Monday that it was investigating Nvidia for violating commitments made during its acquisition of Mellanox Technologies, a company that makes computer networking equipment. The Chinese regulator approved Nvidia’s acquisition of the company in 2020 with conditions to prevent anti-competitive practices and ensure supplies to China.

Nvidia said in a statement that it was “happy to answer” questions from China’s regulators. “We work hard to provide the best products we can in every region and honor our commitments everywhere we do business,” the statement said.

As the Biden administration has progressively tightened restrictions on Nvidia’s chip sales to China, the company has responded by offering less powerful versions of its chips to the Chinese market. Officials in Washington, in trying to prevent Chinese companies from buying advanced chips and the machines to make them, say that the technology is essential not just for smartphones and chatbots but also for military superiority.

Chinese tech companies have resorted to stockpiling the chips, while also turning to smugglers and front companies to secure supplies. At the same time, Beijing is pouring large sums of money into its own chip companies in an attempt to make its tech sector less reliant on foreign technology.