The US Department of Justice (DOJ) has escalated its antitrust investigation into Nvidia by issuing subpoenas to the company and others in the industry. This move marks a significant step forward in the probe, signaling that the government may be closer to filing a formal complaint, reports Bloomberg.
Citing sources familiar with the matter, the report said that the DOJ is particularly concerned about Nvidia’s business practices, which allegedly make it difficult for customers to switch to other suppliers. The company is also accused of penalizing buyers who do not exclusively use its AI chips, a practice that could stifle competition in the rapidly growing AI market, the report added.
This investigation follows a previous inquiry where the DOJ issued questionnaires to industry players. The San Francisco office of the DOJ is leading the investigation, which is now focusing on Nvidia’s acquisition of RunAI, a software company specializing in AI computing management. Regulators are scrutinizing whether this acquisition could further entrench Nvidia’s dominance, making it even harder for customers to choose alternative chip providers.
More power comes with more risk and responsibility
Nvidia, known for its rapid rise as a key player in the AI boom, defended its market position, stating that its success is due to the superior performance of its products.
“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 a statement to the news agency.
The company has faced growing regulatory scrutiny as it has surged to the forefront of the global semiconductor industry, surpassing former leaders like Intel Corp. “Our position in markets relating to AI has led to increased interest in our business from regulators worldwide,” it said in its Q1 earnings report.
With its AI processors now being a critical part of the tech infrastructure for giants like Microsoft and Meta Platforms, Nvidia’s practices have become a central focus for regulators. The company’s French offices were also raided in 2023 for alleged “anti-competitive practices.”
“Balancing innovation, scale, and competition is one of the most significant challenges facing big tech today, especially as the industry evolves rapidly,” said Faisal Kawoosa, Founder and lead analyst at Techarc. “While other companies are attempting to enter the AI chip space, it’s not necessarily due to Nvidia actively restricting them. However, the barriers to entry are undeniably high, requiring substantial investment and fundamental R&D. Nvidia has spent years developing its technology, making it difficult for others, who are only just starting, to catch up.”
Nvidia’s approach to offering a full stack of AI solutions — from compute to software to networking — positions it strongly in the current AI boom, surpassing its competitors in both technology and scale.
“Nvidia is in a dominant position, offering a comprehensive stack that outpaces rivals in technology, performance, and scale,” said Neil Shah, VP for research and partner at Counterpoint Research. “However, this strong market position could frustrate competitors and limit customers’ negotiating power. With Nvidia’s bundled solutions, there’s a risk of inflexibility and added costs for customers seeking to mix and match solutions.”
Shah further pointed out that as a market leader, Nvidia will face intense scrutiny and may need to be more flexible to support competitor solutions, much like how Apple, Microsoft, and Google have had to manage their market dominance.
The news agency reported that Nvidia’s stock, which recently suffered a historic $279 billion loss, took another hit following the news of the subpoenas.
This investigation into Nvidia comes at a time when access to AI technology is increasingly seen as crucial for economic and national security, raising broader questions about the role of major tech companies in shaping the future of AI.
A query seeking comments from Nvidia remains unanswered.
Source:: Network World