Nvidia Receives DOJ Subpoena in Escalating Antitrust Probe

(Bloomberg) — The U.S. Department of Justice has sent subpoenas to Nvidia Corp . (NVDA) and other companies as it looks for evidence that the chipmaker violated antitrust laws, an escalation of its investigation into the dominant supplier of AI processors.

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

Antitrust officials are concerned that Nvidia is making it harder to switch to other vendors and penalizing buyers who don’t exclusively use its artificial intelligence chips, according to the people, who asked not to be identified because the discussions are private.

Shares of Nvidia, which posted a record loss on Tuesday, fell further in late trading after Bloomberg reported the subpoenas. Still, the stock has doubled this year — fueled by explosive sales growth at the Santa Clara, Calif.-based chipmaker.

As part of the probe, which Bloomberg previously reported in June, investigators reached out to other tech companies to gather information. The DOJ’s San Francisco office is leading the investigation, the people said. A DOJ representative declined to comment.

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

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

Nvidia has attracted regulatory attention since becoming the world’s most valuable chipmaker and a key beneficiary of the artificial intelligence spending boom. Sales have doubled every quarter and eclipsed one-time chip leaders such as Intel Corp.

In the DOJ investigation, regulators investigated Nvidia’s acquisition of RunAI, a deal announced in April. That company makes software to manage AI computing, and there are concerns that the tie-up will make it harder for customers to switch from Nvidia chips. Regulators are also questioning whether Nvidia offers preferential supply and pricing to customers who use its technology exclusively or buy its complete systems, according to the people.

Founded in 1993, Nvidia made a name for itself by selling graphics cards to PC gamers. But his approach to chipmaking ultimately proved useful for building AI models, a process that involves bombarding software with data. The company has also quickly expanded its lineup with a range of software, servers, networks and services — all aimed, Nvidia claims, at accelerating the deployment of AI.

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Nvidia Chief Executive Jensen Huang said it prioritizes customers who can use its products in data centers out-of-the-box as soon as it supplies them, a policy aimed at preventing storage and speeding up the wider adoption of AI.

The success of its products — along with rivals’ struggles to develop alternative chips — has made Nvidia a crucial part of the supply chain for some of the world’s biggest companies. Microsoft Corp. and Meta Platforms Inc., for example, spend more than 40 percent of their hardware budget on chipmaker equipment. At the peak of Nvidia’s H100 accelerator shortage, individual components retailed for up to $90,000 each.

Analysts expect Nvidia to generate revenue of $120.8 billion in calendar 2024, up from $16 billion in 2020, with most of the money coming from its data center unit. In fact, Nvidia is set to make more profit this year than the total sales of its closest rival, Advanced Micro Devices Inc.

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

(Updates with Nvidia’s response starting in the sixth paragraph.)

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