Department of Justice Begins Antitrust Probe into Nvidia

By Kevin Jackson

August 9, 2024

After months of skyrocketing stock prices and unhinged optimism, Nvidia has run into a few snags – a  design flaw in one of its new chips and an antitrust probe from the U.S. Department of Justice.

The company has recently announced design flaws in its new B200 AI chips. Specifically, the issue lies in the processor die on the Blackwell B200 AI chips that connect two GPUs on a single board. Before this discovery, Nvidia had planned to have B200 chips in customer hands by the end of 2024. Now, shipments have been pushed back to 2025.

As if this bad news wasn’t enough, there have also been reports that Nvidia is facing two antitrust probes from the U.S. Department of Justice. The first probe focuses on accusations of pushing customers to buy Nvidia products exclusively and potentially punishing those who have purchased products from competitors. The Department of Justice will also investigate Nvidia’s decision to charge higher prices to customers who also want to buy AI chips from rival companies.

The second investigation has to do with Nvidia’s acquisition of Israeli startup Run:ai. Nvidia purchased the AI workload orchestration company for $700 million in April 2024. Run:ai develops software that optimizes GPU usage by allowing multiple AI applications to run on the same GPU. This reduces the number of GPUs needed for AI projects, greatly reducing initial cost.

The Department of Justice’s investigation is concerned that the acquisition would further entrench Nvidia’s dominant position and would bring about antitrust allegations. More specifically, the Department is investigating whether Nvidia acquired Run:ai to suppress a technology that could decrease demand for its GPUs.

Nvidia spokespeople have jumped to the company’s defense, saying that the company competes on merit and has decades of experience in investment and innovation to prove its good intentions. Nvidia has also stated that it will fully cooperate with regulators and provide any necessary information.

This isn’t the first time that Nvidia’s dominance in the AI market has come under scrutiny. Mizuho Securities estimates that Nvidia is in control of somewhere between 70%-95% of the market for AI chips used for training and deploying models. This overwhelming presence has pushed certain Democratic lawmakers to call for antitrust investigations. Specifically, ten progressive advocacy groups recently wrote a letter to Assistant Attorney General Johnathan Kanter to advocate for an antitrust investigation into Nvidia.

Considering Nvidia’s explosive ride to the top of Wall Street, this investigation and the design flaw on the B200 chips are both causing some intense disruption of the company’s stock price. Nvidia’s stock reportedly dropped 35% after announcing its chip delay. Granted, the price has rebounded some since this initial drop, but Nvidia’s stock has fallen more than 20% overall compared to its peak on June 18.

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