Nvidia Receives DOJ Subpoena Amid Record Price Drop

Shortly after the market closed, Bloomberg reported that the Justice Department, under the leadership of Kamala Harris, issued subpoenas to Nvidia and other companies. This move is part of an ongoing investigation into potential antitrust violations by Nvidia, a leading provider of AI processors. This news further drove down Nvidia's stock prices.

DOJ Escalates Investigation

The Justice Department, which had previously sent questionnaires to various companies, has now begun issuing legally binding requests for information. This action brings the government one step closer to lodging a formal complaint against a company. Nvidia, despite its shortcomings, is not monopolizing the industry. Its competitors, such as Intel, are simply failing to keep up.

Allegations Against Nvidia

Antitrust officials allege that Nvidia is making it increasingly difficult for customers to switch to other suppliers and is penalizing those who do not exclusively use its AI chips. Critics argue that it's the capabilities of Nvidia's chips that are compelling everyone to order them, even if their performance doesn't live up to the hype. Nvidia is capitalizing on this by selling to those who will soon realize that they've invested millions in chips for chatbots that yield no returns.

Nvidia's Stock Takes a Hit

Nvidia's shares, which already experienced a significant drop on Tuesday, losing a record $280 billion in market cap, fell even further after Bloomberg's report on the subpoenas. The total drop for the day amounted to $340 billion. Some are speculating that this could be a deliberate attempt by Harris's administration to undermine her election chances by destabilizing the market.

DOJ's Ongoing Probe

As part of the investigation, the DOJ has been reaching out to other tech companies for information. The department's San Francisco office, where Harris was once Attorney General, is leading the inquiry. The DOJ is particularly interested in Nvidia's acquisition of RunAI, a company that develops software for managing AI computing. There are concerns that this merger will make it harder for customers to switch away from Nvidia's chips. The DOJ is also looking into whether Nvidia is giving preferential treatment to customers who exclusively use its technology or purchase its complete systems.

Nvidia's Response

Nvidia CEO Jensen Huang has stated that he prioritizes customers who can immediately utilize his products in ready-to-go data centers, a strategy aimed at preventing stockpiling and accelerating the adoption of AI.

Implications of the Probe

While the official reason for the DOJ's investigation is questionable, it seems more likely that the administration is signaling its intention to extract its share in bribes, kickbacks, and penalties from Nvidia, currently the world's most important company. Analysts predict that Nvidia will generate over $120 billion of revenue in 2024, up from $16 billion in 2020, with the majority of this revenue coming from its data center unit. In fact, Nvidia's projected profit this year surpasses the total sales of its closest competitor, Advanced Micro Devices.

Bottom Line

The implications of the DOJ's investigation into Nvidia are significant, not just for the company, but for the tech industry as a whole. The probe could potentially reshape the landscape of the AI chip market and impact the broader adoption of AI technology. What are your thoughts on this development? Share this article with your friends and join the conversation. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.