China has launched an investigation into Nvidia based on a takeover that is now long outdated.

According to TechCrunch, the Chinese market regulator has opened an investigation against Nvidia. The subject of the investigation is the takeover of the Israeli company Mellanox. Nvidia bought Mellanox to expand its networking capabilities, particularly in terms of interconnects for HPC systems. The takeover took place five years ago.

It is not surprising that China is now suddenly taking out the magnifying glass. The USA is further tightening its trade embargo and China is fighting back. Despite restrictions imposed by the US government, China is both an important market for US chip companies and an important part of the supply chain.

You can therefore look at the antitrust investigation into the Mellanox takeover from a political perspective. China has the teeth to bite back. The country can make it harder for U.S. companies to sell what is allowed under embargo rules and also impose restrictions on, for example, the export of key components or raw materials.

Big takeover

In 2019, Nvidia acquired Mellanox for nearly $7 billion and with certain covenants. Nvidia promised to release information about new products within 90 days of release. Nvidia also allowed Chinese chipmakers to test the products with Mellanox technology to make sure they work.

Nvidia is in a bind due to restrictions imposed by Washington. It is not allowed to sell its AI chips to Chinese companies. China, in turn, banned some sales of Micron products. The economic conflict between China and the USA has been going on for a long time and Nvidia is now playing a key role in it.