On fire! NVIDIA faces another heavy blow from US antitrust after a 9.5% plunge

According to the financial news app Zhitong Finance, on the first trading day of September, NVIDIA (NVDA.US) suffered a heavy blow with its stock price plummeting by 9.5% at the close, marking the largest market value evaporation among US individual stocks. Since the release of its financial report after the close last Wednesday, NVIDIA's stock price has cumulatively dropped by 14%. The market has different interpretations of this situation, with some analysts believing it is NVIDIA "digesting the troubles of growth" and still seeing a bright future ahead. However, there are also views that NVIDIA's financial report has drawn market attention to the sustainability of its massive investments in AI hardware. Following the sharp drop in stock price, NVIDIA faces a new challenge: increased antitrust scrutiny from the US government. After the US market closed on September 3 (Tuesday), the Department of Justice issued subpoenas to NVIDIA and other companies to seek evidence of potential antitrust violations by this major artificial intelligence processor supplier, marking a further escalation of the investigation into NVIDIA.

Sources familiar with the investigation revealed that the Department of Justice had previously issued questionnaires to companies for investigation purposes, and now they have issued legally binding requests to companies to provide information. This action brings the government one step closer to formally filing a lawsuit.

The above-mentioned sources stated that antitrust officials are concerned that NVIDIA may make it more difficult for suppliers to switch to other suppliers and may penalize buyers who do not exclusively use its AI chips. As the discussions are held privately, these sources are unwilling to disclose their identities.

In Tuesday's trading, NVIDIA's stock price fell by 9.5%, hitting a new low since August 9. The sharp drop in stock price led to NVIDIA's market value shrinking by approximately $27.89 billion in a single day, setting a new record for the largest single-day market value evaporation in the US stock market previously held by Meta. After the news of the subpoenas came out, NVIDIA's stock price further declined in the final trading session. Nevertheless, thanks to its explosive sales growth, NVIDIA's stock price has still more than doubled this year.

As part of the investigation, Bloomberg reported on this matter in June, with investigators reaching out to other tech companies for information. Sources mentioned that the Department of Justice's San Francisco office is leading the investigation. A representative from the Department of Justice declined to comment on this matter.

In response to questions regarding the investigation, NVIDIA stated that its market leadership is based on the high quality of its products, which can deliver faster performance.

In an email statement, NVIDIA said, "We win with our own strength, which is reflected in our benchmark results and the value we provide to customers, who are free to choose the solution that best suits them."

Since becoming the world's most valuable chipmaker and a major beneficiary of the AI spending boom, NVIDIA has been closely watched by regulatory authorities. The company's sales have more than doubled every quarter, surpassing former chip leaders like Intel.

In the Department of Justice's investigation, regulators have been looking into NVIDIA's acquisition of RunAI, announced in April. RunAI produces software for managing AI computing, and there are concerns that this collaboration will make it harder for customers to switch away from NVIDIA chips. According to sources, regulators are also inquiring whether NVIDIA offers preferential supply and pricing to customers who exclusively use its technology or purchase its complete systems NVIDIA was founded in 1993, initially known for selling graphics cards to PC gamers. However, its chip manufacturing technology was eventually proven to be very useful for building artificial intelligence models, a process that involves a large amount of data for software training. The company also quickly expanded its product line, introducing a range of software, servers, networks, and services to accelerate the deployment of artificial intelligence.

NVIDIA CEO Jensen Huang stated that he prioritizes customers who can immediately use their products in their ready-to-use data centers, a policy aimed at preventing hoarding and speeding up the broader application of AI.

The success of NVIDIA's products, along with challenges from competitors in launching alternative chips, has made NVIDIA a key part of the supply chains of some of the world's largest companies. For example, Microsoft (MSFT.US) and Meta Platforms Inc. (META.US) allocate over 40% of their hardware budgets to purchasing NVIDIA devices. During the most tense supply period for NVIDIA's H100 accelerator, the retail price of a single component reached as high as $90,000.

Analysts project that by 2024, NVIDIA's revenue will reach $120.8 billion, significantly higher than the $16 billion in 2020, with most of the revenue coming from the data center division. In fact, NVIDIA's profit this year is expected to exceed the total sales of its closest competitor, AMD.

In fact, NVIDIA is facing not only regulatory issues. As the importance of artificial intelligence technology in economic strength and national security continues to grow, acquiring AI capabilities has become a focus of attention for governments around the world