The U.S. DOJ subpoenas Nvidia over potential antitrust violations related to its AI technology, raising concerns about market dominance and fair competition.
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On Tuesday, September 3rd, the US DOJ sent a subpoena to Nvidia (NYSE: $NVDA). This subpoena stated that the recent use of Nvidia’s GPUs (in use for artificial intelligence) in their software and new technology has potentially been breaking main antitrust practices. Antitrust practices are effectively prohibited because the US does not want monopolies under public business practices. They also effectively stop predatory pricing and the promotion of fair competition.
For Nvidia specifically, many of the officials sending the probe believe that the chipmaker is making it harder for people who use their product to switch buyers. Companies like Rivian are looking to switch to an in-house system. We have seen this before in companies like Apple which now make their own chips and do not outsource to other companies to keep overhead costs more flexible and less costly. This can stop third-party complications but can raise greater legal problems.
But here’s the thing...
The article went on to state that, “Nvidia's quarterly forecast, which fell short of investors' expectations last week, has also softened the optimism around AI.” While the article does highlight the fact that antitrust is a large issue, it seems as though this news comes after the fact that Nvidia didn’t perform well.
The article continues by saying that these antitrust regulations have been brought to them by international countries like South Korea, the UK, and China. These requests for information from these regulators have been regarding the partnerships and agreements with other companies.
Spokespeople for the company have noted this market dominance by stating that Nvidia does well and performs well, based on the merit that they have created over time. When people think of online shopping they think of Amazon. Nothing is different for Nvidia. Customers can choose if they would want to shop or use a different product, however, Nvidia can’t control what the consumer does.
Again, we have seen this with companies like Apple that create an “ecosystem" and make it quite hard to “leave” without feeling as though you are missing out on something. They have done well with customer retention, but these same regulatory issues arose when they came to light and saw their stock growing.
