Nvidia's shares plummet after subpoena from the US Justice Department

As the antitrust probe intensifies, Nvidia's market capitalisation was slashed by $279 billion, a record one-day loss for any company

By Forbes India

Published: Sep 4, 2024 10:09:58 AM IST

Updated: Sep 4, 2024 10:18:33 AM IST

Image: Tayfun Coskun/Anadolu via Getty Images

Nvidia shares slipped 9.5 percent on Tuesday at $108 after the chip giant received subpoenas from the US Justice Department as part of an antitrust investigation.

Citing people familiar with the investigation, Bloomberg reported that the government sent subpoenas to Nvidia Corp. and other unnamed technology companies as it seeks evidence that the chipmaker violated antitrust laws, an escalation of its investigation into the dominant provider of AI processors.

The antitrust regulator had previously delivered questionnaires and has now sent legally binding requests to Nvidia. Reportedly, the antitrust officials think Nvidia may be making it more difficult for buyers to switch to other chip suppliers while penalising those who don’t exclusively purchase their AI chips.

The probe comes as the company is estimated to control between 70 percent and 95 percent of the market for AI chips, according to CNBC. Last month, the Department of Justice launched an investigation into the company after complaints from competitors that it had abused its market dominance.

The investigation into Nvidia also has a focus on the company’s $700 million acquisition of AI management firm RunAI, as regulators are concerned the deal makes finding alternatives to Nvidia chips difficult, according to Bloomberg.

The chip designer’s stock has been falling since reporting record-setting earnings last week that failed to meet investors’ expectations. The company also mentioned it has received requests for information from regulators in the US and South Korea regarding its investments, partnerships, and agreements with other companies. It has also received enquiries from the EU, UK, and China.

The chipmaker announced its latest financial results last Wednesday, recording $30.04 billion in revenue over the past three months, a 122 percent jump from the year prior. Sales in Nvidia's data centre segment grew 154 percent to $26.3 billion in the second quarter, above estimates of $25.15 billion.

Shares have dropped nearly 15 percent in the last five days of trading. But it’s still up 141 percent so far this year, on the back of booming AI expectations.

Nvidia spokesperson John Rizzo responded to Forbes’ inquiry about the probe, saying the company’s merit is reflected in its results and value to customers, “who can choose whatever solution is best for them."

Nvidia’s most prominent customers include Microsoft, Meta, Amazon, and Google, with Microsoft and Meta allocating 40 percent of their budgets to Nvidia’s hardware. Regulators have not filed a formal complaint against Nvidia, which also dealt with Justice Department subpoenas in 2006 over an antitrust investigation into its graphics chips.