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Nvidia is facing mounting legal challenges as the U.S. Department of Justice (DOJ) has issued a subpoena as part of a growing antitrust investigation.
The probe seeks to establish whether Nvidia has engaged in practices that allowed it to leverage its dominant position in the AI chip market to stifle competition, as reported by Bloomberg yesterday, citing unnamed sources familiar with the situation. Nvidia has faced allegations of anti-competitive practices, including making it difficult for customers to switch to alternative suppliers and punishing those who do not exclusively use its AI chips.
This scrutiny has intensified as Nvidia’s influence in the AI processor market has surged in recent years. According to industry estimates, Nvidia controls 80% of the datacenter AI chips and recently reported $30 billion in revenue for the second quarter of 2024.
The DOJ’s decision to issue subpoenas marks an escalation in the investigation, suggesting that the agency could be moving closer to taking legal action. Previously, the DOJ had sent questionnaires to several tech companies, but the latest subpoena sent to Nvidia is seen as a more aggressive step that could lead to a lawsuit.
The timing of the subpoena coincides with a market downturn for Nvidia, which experienced its largest single-day market value loss since 2020. Yesterday Nvidia shares took a nosedive, plunging 9.5% and wiping out nearly $279 billion in market value.
This decline was exacerbated by the news of the DOJ’s investigation, which likely spooked investors and contributed to sell-offs. Following the announcement, Nvidia’s shares continued to drop an additional 2.5% in after-hours trading, reflecting the uncertainty surrounding the company’s future amid regulatory scrutiny.
While Nvidia’s stock has shown resilience throughout the year, gaining 141% in value through the ongoing AI boom, there is a chance that a face-off with the U.S. antitrust watchdog might affect the company’s market standing.
