($) Why is China Investigating Nvidia: Blackwell
And another chip on the negotiation table of a grand bargain
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Last week, a curious and unprecedented anti-monopoly investigation flew across many of our radars – China’s State Administration for Market Regulation (SAMR) announced its investigation into the darling of AI, Nvidia. While I shared some of my thoughts in the initial coverage of the event, in both the New York Times and Bloomberg, it is impossible to flesh out all angles of this issue in a quote or two.
It’s a good thing I have been writing a newsletter for four years, I suppose.
This investigation is unprecedented because SAMR has never done something like this before. It is the designated regulator that reviews major acquisitions where there is a China nexus, e.g. Qualcomm’s acquisition of NXP, similar to the United States’s Federal Trade Commission. It has been a forceful watchdog of the many anti-competitive shenanigans that have been festering China’s internet platform economy in the last few years, resulting in sizable fines on Alibaba and Meituan. But, to my knowledge, it has never gone after a foreign company until now.
This investigation is curious because of the timing of the announcement. It came a mere two weeks after Jensen Huang received an honorary degree from the Hong Kong University of Science and Technology to great fanfare, and after Nvidia’s EVP of Worldwide Field Operations (i.e. one of the most senior sales executives) met with China’s vice minister of commerce, who is a key negotiator on all things tariffs and export control. Thus, it would be a mistake to interpret this investigation as purely hostile given the circumstances leading up to it. Furthermore, after the investigation was announced, Nvidia pledged to continue growing its China presence, especially on the R&D side for autonomous driving, by hiring more people – ending 2024 with 4,000 employees from 3,000 at the beginning of this year, a 25% increase.
How do we sort all this out?
I always go back to the technology itself, where things were and where things are going. And to do so, we have to wind the clock back to four years ago, when Nvidia was trying to buy Mellanox.
