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The backstory: Nvidia is a big shot in the tech world, known for its Graphics Processing Units (GPUs). These GPUs are essential components behind the scenes of computing. They break down complex tasks into manageable bits, supercharging performance.
With an 84% market share, Nvidia's dominance in the GPU game leaves competitors like Intel and AMD in the dust. The company's market valuation sits at US$1 trillion, and it plays a crucial role in the rapidly evolving world of artificial Intelligence (AI). In fact, systems powering services like ChatGPT rely heavily on Nvidia GPUs, with some models costing over US$10,000.
Major players like software company Oracle have also bet big on Nvidia chips, especially when ChatGPT became a household name, leading to a jump in Nvidia's stock and chip demand.
More recently: The French competition authority raised eyebrows about competition issues in June. It was looking into the highly competitive world of cloud computing, where giants like Amazon, Google and Microsoft rule the roost. The authority was curious about whether these tech titans were playing fair when it came to competition.
Last Tuesday, France's competition authority conducted a surprise raid on a company operating in the "graphics cards sector." Though not officially confirmed, some sources named Nvidia as the target. This incident is part of a broader trend in Europe, where regulators are trying to keep Big Tech giants in check, ensuring they don't squash the competition.
The development: The EU has reportedly kicked off an investigation into potential anti-competitive practices within the AI chip market. Insiders said last week that the European Commission, essentially the EU's executive arm, is in the early stages of collecting data. They're specifically looking into GPUs, the very heart and soul of AI and gaming.
But it's important to note that this isn't a full-blown investigation just yet. Authorities are still trying to understand if the situation calls for intervention in the future. The outcome remains a bit of a mystery, with the possibility of a formal investigation or even sanctions hanging in the balance.
"In terms of next steps after the initial raid, there will most likely be court proceedings against the raid itself and the order of the judge having authorised the raid," said Charlotte Colin-Dubuisson, antitrust and foreign investment partner at law firm Linklaters.
“We’re seeing incredible orders to retool the world’s data centers,” said Nvidia CEO Jensen Huang to analysts on a conference call back in May. “The budget of a data center will shift very strongly to accelerated computing.”
"With all the enthusiasm around AI and the fact Nvidia delivered a huge beat for first-quarter results and second-quarter estimates, this gives some actual evidence AI is for real," said Daniel Morgan, senior portfolio manager at Synovus Trust in Atlanta, Georgia, in the US.