Nvidia Faces Subpoena As US Dept Of Justice Seeks Antitrust Evidence: All You Need To Know

Nvidia stock, which already saw a significant decline earlier this week, continued to fall after news of the subpoenas surfaced.

Nvidia has come under increased regulatory scrutiny as it has grown to become the world’s most valuable chipmaker.

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The US Department of Justice (DOJ) has escalated its investigation into Nvidia Corp. by issuing subpoenas to the company and others, seeking evidence of potential antitrust violations. The move indicates that the DOJ is intensifying its scrutiny of Nvidia’s market practices as the leading supplier of artificial intelligence (AI) processors.

As reported by Fortune based on source inputs, the DOJ had previously reached out to companies with questionnaires but is now mandating responses through legally binding subpoenas. This step brings the government closer to potentially filing a formal complaint against Nvidia.

What Is The Probe About?

The investigation centres on concerns that Nvidia is hindering competition by making it difficult for companies to switch to alternative AI chip suppliers and by imposing penalties on buyers that do not exclusively purchase its products.

The sources requested anonymity due to the confidential nature of the inquiry.

Nvidia Stock In Free Fall

Nvidia’s stock, which already saw a significant decline earlier this week, continued to fall after news of the subpoenas surfaced. Despite the recent downturn, the company’s shares have surged this year, buoyed by robust sales growth amid heightened demand for AI technology.

The DOJ’s San Francisco office is leading the investigation, which began with outreach to other tech firms to collect relevant information. Both Nvidia and the DOJ have declined to comment on the ongoing probe.

Nvidia has come under increased regulatory scrutiny as it has grown to become the world’s most valuable chipmaker, capitalising on the rapid expansion of the AI market. Its sales have been consistently more than doubling each quarter, outpacing established rivals like Intel Corp.

Analysts Warn Against AI Pace

Amid this regulatory attention, some market analysts have expressed caution about the AI sector's growth trajectory, reports Fortune. Analysts from JPMorgan Asset Management and BlackRock Investment Institute have recently warned that the current pace of AI investment might not be sustainable unless demand extends beyond the tech industry. Michael Cembalest of JPMorgan highlighted concerns over the justification of AI spending, while Jean Boivin of BlackRock noted that the broader adoption of AI could take years.

These warnings add to existing market volatility, which has recently been driven by fears of overvaluation and concerns about broader economic signals. Tech giants like Alphabet, Microsoft, and Apple also saw their shares decline as doubts about the profitability of AI investments continued to spread.

The Philadelphia semiconductor index, a key measure of chip sector performance, saw its steepest drop since 2020, with notable declines among companies like Intel, Applied Materials, and Taiwan Semiconductor Manufacturing Co.

As the market remains on edge, investors are closely watching upcoming economic reports, including the US payrolls data, which could influence the US Federal Reserve’s next moves on interest rates. With uncertainty high and AI spending under the microscope, the tech sector faces a challenging path ahead.