China’s Top Market Watchdog Rules Nvidia Violated Antitrust Law

Currently, the Trump administration’s top priority is securing a trade agreement with China. Beijing has recently signaled its goodwill by indicating intentions to purchase 500 Boeing commercial jets. But early Monday, just ahead of the U.S. cash session, news broke that China had ruled Nvidia in violation of anti-monopoly laws. If that’s any indication of sentiment surrounding trade talks between the two superpowers, the optics here don’t look great.

U.S. equity futures were muted early Monday, with Nvidia shares down 2% in premarket trading after China’s State Administration for Market Regulation (SAMR) ruled that the company violated anti-monopoly laws in connection with a 2020 deal.

The agency gave no details beyond a one-sentence statement. Here are more details via state-run media Xinhua News Agency:

China’s top market watchdog announced Monday a decision to launch further probe into Nvidia for anti-trust violations after a preliminary investigation.

The State Administration for Market Regulation (SAMR) said in an online statement that Nvidia had violated China’s anti-monopoly law and a 2020 decision by the market regulator on Nvidia’s acquisition of Mellanox Technologies.

In 2020, the SAMR conditionally approved the acquisition after an antitrust review that began in 2019. The deal was subject to multiple restrictive conditions due to concerns that the merger could exclude or restrict competition in global and Chinese markets for GPU accelerators, dedicated network interconnect equipment, and high-speed Ethernet adapters

Commenting on the new development coming out of China, Goldman analyst Shubham Ghosh, based in Hong Kong, told clients, „Sino-US trade talks are ongoing, and China’s probe into Nvidia finding they violated the Anti-monopoly law has created some uncertainty.„

On a separate desk, UBS analyst Nicola Brion, based in the UK, told clients, „The Euro Stoxx 50 is up 0.4% Monday with cyclicals broadly outperforming defensives. Semis are leading gains up 1.6% despite headlines around China’s preliminary findings of Nvidia violating antitrust regulations.”

Shares of Nvidia are down 2% in premarket trading in New York. On the year, shares are up 32%. The chart below shows that upside price action has stalled since mid-August. The $180 level is the current resistance.

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