China says Nvidia breached antitrust rules with Mellanox acquisition, but TikTok deal looms – News

China’s antitrust regulator today said that Nvidia Corp. has breached local competition laws.

Officials reached that conclusion following a preliminary investigation into the chipmaker’s acquisition of Mellanox Technologies Ltd. According to The Register, the antitrust regulator has referred the matter to a “formal probe.” It’s believed the formal probe could lead to fines or restrictions on Nvidia Corp.’s business operations in China.

The development comes as the U.S. and China hold trade talks in Madrid. It’s unclear whether the antitrust decision could affect the discussions, which are in their second day. The technology sector has emerged as a major focus of the talks.

U.S. Treasury Secretary Scott Bessent also announced today that the U.S. and China have reached a “framework for a TikTok deal.” Last year Congress passed a bill that requires TikTok parent ByteDance Ltd. to sell the app or face a ban. The company has until Friday to find a buyer. 

Mellanox was a network equipment supplier that Nvidia acquired in 2020 for $6.9 billion. The deal bought the chipmaker the Spectrum and Quantum switch families, which are designed for Ethernet and InfiniBand networks, respectively. Nvidia also obtained the BlueField line of data processing units.

Nvidia uses all three product families to power its DGX SuperPOD infrastructure platform. Introduced a year after the Mellanox acquisition, the platform enables companies to link together a large number of graphics card appliances into clusters. SuperPOD uses Spectrum and Quantum switches to move data inside between graphics cards. BlueField processors perform related tasks such as traffic encryption. 

China approved the Mellanox acquisition in April 2020 after Nvidia pledged to continue selling the company’s technology to local customers. Those customers represent an important market for the chipmaker. After the Trump administration limited the sale of some AI chips to China in April, Nvidia estimated that the export controls would cost it $8 billion during the second quarter alone.

Nvidia was already facing a complicated business environment in China prior to today’s antitrust decision. In August, the U.S. government gave the chipmaker permission to restart shipments of H20 graphics cards to China. A few days later, Chinese officials reportedly warned local companies to avoid the chip.

The H20 is a scaled-down version of Nvidia’s H100 graphics card, which was at one point its flagship AI accelerator for data centers. The company developed the former chip to comply with export restrictions the U.S. introduced in 2022. Last month, Nvidia Chief Executive Officer Jensen Huang indicated that the company could make newer chips based on its latest Blackwell architecture available in China.

An Nvidia spokesperson said in response to today’s antitrust decision that “we will continue to cooperate with all relevant government agencies as they evaluate the impact of export controls on competition.”

The development comes as the U.S. and China hold trade talks in Madrid. It’s unclear whether the antitrust decision could affect the discussions, which are in their second day. The technology sector has emerged as a major focus of the talks.

As for TikTok, the terms remain unclear. “We’re not going to talk about the commercial teams of the deal,” Bessent told reporters. “It’s between two private parties, but the commercial terms have been agreed upon.”

It’s unclear what private party is hoping to acquire TikTok. Oracle Corp., which hosts some of the service’s backend infrastructure, and Microsoft Corp. were both floated as potential buyers earlier this year. AI search startup Perplexity AI Inc. and mobile advertising provider AppLovin Corp. have both publicly expressed interest in acquiring TikTok.

Photo: Nvidia