Semafor Signals
US eyes antitrust investigation against Nvidia as market value surpasses $3 trillion
Insights from Business Insider, the Wall Street Journal, Politico, and Bloomberg
The News
The US Department of Justice is reportedly eyeing an antitrust investigation into AI chipmaker Nvidia. The company, whose market value just surpassed $3 trillion, is coming under scrutiny for its high-demand artificial intelligence chips. The Federal Trade Commission is also looking into Microsoft and OpenAI, Politico reported.
Nvidia has overtaken tech giant Apple to be the second-most valuable company in the world; Microsoft holds the top spot.
Nvidia has been growing at breakneck speed over the last year, as investors bet on the continued growth of artificial intelligence. The company’s value has increased by 50% since February, the BBC reported.
SIGNALS
Biden administration has made regulating Big Tech a big priority
A potential antitrust investigation into Nvidia and other large tech companies is a continuation of the Biden administration’s efforts to rein in Big Tech, New York Times’ Andrew Ross Sorkin wrote in his Dealbook newsletter, and it follows similar attempts at regulation in the European Union. Both the Department of Justice and the FTC have stressed that in the case of AI, they want to avoid a repeat of allowing social media and online advertising companies to grow unfettered, potentially hurting competition and leaving consumers worse off, Politico noted.
Competitors, waning demand, and geopolitics could slow Nvidia
Nvidia is on a sharp upward trajectory, but how long it will last is an open question. Competition, including from other tech giants that make their own chips, could soon nip at Nvidia’s 80% market share. Chips could also lose importance as the development of AI continues beyond the current protocol of building and training generative models, which requires vast amounts of computation. Geopolitics, particularly tensions between the US and China, may also impact Nvidia in the long run. US officials could decide to further restrict Nvidia from exporting AI-relevant technology to China, a key market, an investment researcher told Business Insider.
Other AI players prop up Nvidia’s growth
Nvidia owes its success in part to a number of smaller companies that operate in the AI sphere, and many of them are based in Taiwan, Bloomberg reported. The island is strategically important for chip makers and world governments seeking to advance AI —companies there produce vital components for the tech, including motherboards, servers, and cooling systems. During the first few days of the ongoing Computex conference in Taipei, Nvidia was notably courting more niche Taiwanese firms, a sign that these smaller companies “hold a key position in the global supply chain,” an analyst told Bloomberg. Nvidia’s CEO Jensen Huang has referred to them as the “unsung heroes” of the industry.
