Nvidia shares fell sharply in premarket trading after China’s top regulatory authority announced that the chip giant violated the country’s anti-monopoly laws. The State Administration for Market Regulation (SAMR) released a statement revealing preliminary findings from its investigation into Nvidia’s 2020 acquisition of Israeli networking company Mellanox Technologies.
According to the regulator, Nvidia breached the terms of its conditional approval related to that deal, though the specifics of the violations were not disclosed.
Why Nvidia shares are slipping in premarket today
Nvidia stock stumbled in premarket trading Monday after Beijing’s top competition watchdog signaled potential violations tied to the company’s past acquisition activity. Shares slipped about 2.5% to $173.36, compared with Friday’s close of $177.82, reflecting fresh investor anxiety over regulatory risks in one of Nvidia’s most important markets.
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At the center of the issue is Nvidia’s 2020 acquisition of Mellanox Technologies, a $7 billion deal that boosted its data center and networking strength. According to China’s State Administration for Market Regulation (SAMR), certain conditions attached to that approval may not have been met. While details of the alleged breach were not disclosed, the finding injects fresh uncertainty into Nvidia’s expansion strategy at a time when U.S.-China trade and technology tensions are already elevated.
Despite the immediate hit, Nvidia’s long-term performance remains striking. The company has added more than 32% in value year-to-date and is still up roughly 49% over the past twelve months. With a market capitalization of about $4.33 trillion, annual revenues near $165.22 billion, and a profit margin above 52%, Nvidia continues to outpace peers across nearly every financial metric. Its return on equity stands at a remarkable 109%, underscoring the strength of its AI-driven growth story.As the probe continues, the implications for Nvidia and broader tech supply chains remain crucial.
China’s enforcement of antitrust laws could lead to heavy fines—ranging from 1% to 10% of annual revenues. At the same time, restrictions on advanced chip sales to China could disrupt Nvidia’s growth trajectory and market access, impacting both the company and global AI innovation.
Analysts remain generally optimistic, with price targets above $200, but caution is warranted as geopolitical and regulatory risks evolve.
Still, investors are watching closely. Wall Street analysts maintain an average price target of $208.59, suggesting upside potential if Nvidia can navigate the legal challenges. But the question is whether regulatory hurdles in China could limit the company’s sales of advanced AI chips at a time when Beijing is tightening oversight of foreign firms. That concern matters: China accounts for a significant share of Nvidia’s demand pipeline, and disruptions there could reverberate through future revenue and profit forecasts.