Nvidia gets subpoena from US Justice Dept in escalating antitrust probe

SAN FRANCISCO - The US Department of Justice (DOJ) sent subpoenas to Nvidia and other companies as it seeks evidence that the chipmaker violated antitrust laws, an escalation of its investigation into the dominant provider of artificial intelligence (AI) processors.

The DOJ, which had previously delivered questionnaires to companies, is now sending legally binding requests that oblige recipients to provide information, according to people familiar with the investigation. That takes the government a step closer to launching a formal complaint. 

Antitrust officials are concerned that Nvidia is making it harder for companies to switch to other suppliers and penalises buyers that do not exclusively use its AI chips, according to the people, who asked not to be identified because the discussions are private.

Nvidia shares, which suffered a record-setting rout on Sept 3, fell further in late trading after Bloomberg reported on the subpoenas. Still,

the stock has more than doubled in 2024

– fuelled by explosive sales growth at the Santa Clara, California-based chipmaker.

As part of the probe, which Bloomberg previously reported in June, investigators have been contacting other technology companies to gather information. The DOJ’s San Francisco office is taking the lead in running the inquiry, the people said. A representative for the DOJ declined to comment.

In response to questions about the probe, Nvidia said that its market dominance stems from the quality of its products, which deliver faster performance. 

“Nvidia wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them,” the company said in an e-mailed statement.

Nvidia has drawn regulatory scrutiny since

becoming the world’s most valuable chipmaker

and a key beneficiary of the AI spending boom. Sales have been more than doubling each quarter, and it has eclipsed one-time chip leaders such as Intel.

In the DOJ probe, regulators have been investigating Nvidia’s acquisition of RunAI, a deal announced in April. That company makes software for managing AI computing, and there are concerns that the tie-up will make it more difficult for customers to switch away from Nvidia chips. Regulators also are inquiring whether Nvidia gives preferential supply and pricing to customers who use its technology exclusively or buy its complete systems, according to the people. 

Nvidia, founded in 1993, made its name by selling graphics cards to computer gamers. But its approach to chipmaking ultimately proved useful for building AI models, a process that involves bombarding the software with data. The company also has rapidly expanded its line-up with a range of software, servers, networking and services – all aimed, Nvidia argues, at speeding up the deployment of AI.

Nvidia chief executive officer Jensen Huang said he prioritises customers who can make use of his products in ready-to-go data centres as soon as he provides them, a policy designed to prevent stockpiling and speed up the broader adoption of AI. 

The success of its products – along with struggles by rivals to field alternative chips – has made Nvidia a crucial part of the supply chain for some of the biggest companies in the world. Microsoft and Meta Platforms, for example, spend more than 40 per cent of their budget for hardware on the chipmaker’s gear. During the peak of shortages of Nvidia’s H100 accelerator, individual components were retailing for as much as US$90,000 (S$118,000) each.

Analysts project that Nvidia will chalk up US$120.8 billion of revenue in calendar year 2024, up from US$16 billion in 2020, with most of that money coming from its data centre unit. In fact, Nvidia is set to bring in more profit this year than the total sales of its nearest rival, Advanced Micro Devices.

There also are broader regulatory questions about Nvidia’s practices. Access to AI capabilities has become a key focus for governments around the world, with the technology becoming increasingly vital to economic strength and national security. BLOOMBERG