China targets Nvidia with anti-monopoly probe amid Madrid trade talks

China's market regulator accuses Nvidia of violating anti-monopoly law after preliminary investigations. The announcement coincides with US-China trade talks in Madrid, where chips are a key agenda item. US Treasury Secretary Scott Bessent calls the timing "poor timing," though some analysts see it as a leverage tactic. The two countries have been facing escalating trade tensions since Trump's first term, with both countries recently engaging in a round of high tariffs before backing down.

The investigation was launched back in December 2024, with the inquiry related to Nvidia's 2020 Mellanox acquisition commitments. China approved the Mellanox deal on the condition that Nvidia would continue GPU supply to the Chinese market. US export controls later forced Nvidia to end sales of its most advanced chips to China. Potential fines could range from 1 to 10 percent of annual sales under Chinese anti-monopoly law.

China represents 13 percent of Nvidia's total sales, creating significant uncertainty for the company. Despite CEO Jensen Huang's three visits to China this year, the charm offensive appears to have fallen short. Chinese tech firms like Tencent and Bytedance are being discouraged by the government from purchasing Nvidia chips, with authorities instead promoting local alternatives. The H20 chips that were specifically designed for the Chinese market remain unsold due to unresolved US payment regulations.

The move follows China's weekend announcement of an anti-dumping probe into US analog semiconductor chips. It is also part of tit-for-tat escalation in the ongoing trade war, which includes US tariffs and Chinese retaliatory measures. Analysts view this as a warning about the consequences of continued US export control policies. The timing also suggests a connection to the Madrid trade negotiations and a potential TikTok ownership deal.

Nvidia stock fell two percent on Monday before recovering, with the company pledging continued cooperation. Industry analysts highlight the risk to billions in networking equipment sales through Mellanox. Chinese semiconductor officials recently called for a permanent halt to Nvidia GPU usage, with authorities heavily promoting domestic alternatives. Experts have suggested that the probe is unlikely to force Nvidia out of the Chinese market, but it does signal China's negotiating strategy.