Nvidia is facing another threat after China announced it is launching an antitrust probe into the company’s $7 billion acquisition of networking company Mellanox.
NVDA – Daily Chart
The price of NVDA has stalled at the $140.79 level as traders assess the valuation of the company. Recent earnings have seen a slowing of previous blockbuster growth.
The State Administration for Market Regulation is China’s monopoly regulator and said it is studying whether Nvidia is abiding by the terms of its conditional approval.
Nvidia uses Mellanox for connecting hardware to graphics chips in large servers, allowing them to function as a large processing system. Any action could harm the company’s business.
It’s not clear if Nvidia has broken the terms of the deal but the US government has forced Nvidia to stop sales of its most powerful products to Chinese customers. The latest probe follows US efforts to halt China’s access to high-tech American chips.
The move may also be in response to the threat of sanctions and China would see Nvidia as a very valuable chess piece ahead of Trump’s term.
Nvidia reported $35.1 billion in sales during its Q3, with $5.4 billion coming from China, up from $4 billion at the same time last year. Nvidia can’t sell its most expensive hardware in China and it makes up less of its revenue. But any loss of sales would hurt the company’s valuation after it recently became the world’s most valuable company.
US stocks broke a two-day losing streak on Wednesday and settled near the recent all-time highs. There is still a period of five weeks before Trump can take the helm of the country and there could be volatility when he does as markets expect some business-friendly actions to spur growth.