Justice Department Subpoenas Nvidia in Broader AI Antitrust Investigation, Report Says

The U.S. Justice Department is reportedly deepening its investigation into Nvidia. Authorities are no longer just questioning competitors, but are now subpoenaing Nvidia and other tech companies for evidence that could support allegations that Nvidia is abusing its “dominant position in artificial intelligence,” Bloomberg reported.

When news of the Justice Department’s investigation into the trillion-dollar company first broke in June, Fast Company reported that the scrutiny was intensifying simply because Nvidia was believed to control “up to 90 percent of the market for chips” that can power AI models. Experts told Fast Company that the Justice Department’s investigation could even be good for Nvidia’s business, noting that the market was virtually flat when the investigation was first announced.

But market confidence appeared to be further shaken on Tuesday, when Nvidia lost “a record $279 billion” in stock value following the release of Bloomberg’s report. Nvidia’s losses became “the largest single-day market cap drop on record,” TheStreet reported.

People familiar with the DOJ investigation told Bloomberg that the DOJ’s “legally binding demands” require competitors to “provide information” about Nvidia’s alleged anticompetitive behavior as a “dominant supplier of AI processors.”

One concern is that Nvidia could provide “preferential sourcing and pricing to customers that exclusively use its technology or buy its complete systems,” sources told Bloomberg. The Justice Department is also reportedly investigating Nvidia’s acquisition of RunAI, suspecting the deal could force RunAI’s customers to use Nvidia chips.

Bloomberg’s report builds on a report last month from The Information that Advanced Micro Devices Inc. (AMD) and other Nvidia rivals have been questioned by the DOJ, as well as third parties that could shed light on whether Nvidia potentially abused its dominance in the AI ​​chip market to pressure customers to buy more of its products.

According to Bloomberg’s sources, the Justice Department is concerned that “Nvidia will make it harder to switch to other suppliers and penalize buyers who don’t exclusively use its AI chips.”

In a statement to Bloomberg, Nvidia insisted that “Nvidia wins on merit, as reflected in our benchmark results and the value it brings to customers, who can choose the solution that works best for them.” Additionally, Bloomberg noted that in the wake of a chip shortage in 2022, Nvidia CEO Jensen Huang said his company was working to prevent a stockpile of Nvidia’s coveted AI chips by prioritizing customers “who can use its products in data centers off the shelf.”

Potential threats to Nvidia’s dominance

Despite the stock drop, Nvidia’s market dominance shows no sign of slowing after its stock more than doubled this year. In an SEC filing this year, Nvidia boasted that its “accelerated computing ecosystem brings AI to every business” with an “ecosystem” spanning “nearly 5 million developers and 40,000 companies.” Nvidia specifically pointed out that “more than 1,600 generative AI companies rely on Nvidia,” and according to Bloomberg, Nvidia will close 2024 with profits greater than the total sales of its closest competitor, AMD.

After the DOJ’s latest landmark victory, which successfully proved that Google holds a monopoly on search, the DOJ appears determined to get ahead of tech companies’ ambitions to seize monopoly power and become the Google of the AI ​​industry. In June, DOJ antitrust chief Jonathan Kanter confirmed to the Financial Times that the DOJ was examining “monopoly chokepoints and the competitive landscape” of AI beyond just examining Nvidia.

According to Kanter, the Justice Department is looking at all aspects of the AI ​​industry: “from the computing power and data used to train large language models, to cloud service providers, engineering talent, and access to critical hardware like graphics processing unit chips.” But the Justice Department appears particularly concerned that GPUs like Nvidia’s advanced AI chips remain a “scarce resource.” Kanter told the Financial Times that “real-time” “intervention” to block a potential monopoly could be “the most meaningful” and least “invasive” intervention as the AI ​​industry grows.