Nvidia’s stock took a hit on Monday after China announced an investigation into the prominent U.S. microchip firm for potential breaches of its anti-monopoly regulations.
In a new statement that offered limited information, Chinese authorities seem to be scrutinizing Nvidia’s $6.9 billion purchase of Mellanox which is a network and data transmission company which took place in 2019. On the same day, Nvidia’s shares dropped by 2.6%, although they still soared by 180% this year.
Recognized as a key indicator of artificial intelligence demand, Nvidia has pushed the AI sector into the spotlight. It has become one of the most valuable entities in the stock market as major tech companies invest heavily in its chips and data centres essential for training and ruining AI systems.
This year, Nvidia’s stock has skyrocketed together with its revenue and profits which is driven by the increase in AI demand. FactSet states that around 16% of Nvidia’s revenue is generated from China which makes it the second-largest source after the U.S.
A representative from Santa Clara which is a California-based company mentioned in an email that Nvidia is eager to address any inquiries that regulators may have regarding the operations of Santa Clara.
Nvidia’s revenue of $35.08 billion marking an increase of 94% from 18.12 billion a year ago was revealed in the latest earnings report. The company has reported earnings of $19.31 billion for the same quarter which is more than twice the $9.24 billion from the same period last year. However, the earnings report did not mention revenue figures from China.
An international finance expert at Virginia Tech, David Beri noted that Nvidia may be required to adjust its strategy in China or allocate budget provisions to navigate the uncertainties that come with doing business in the region.
Unlike Intel, the focus of Nvidia is on designing chips instead of manufacturing them.
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