Why is France targeting Nvidia?
Updates with details from story on French antitrust charges against Nvidia
By Supantha Mukherjee and Martin Coulter
STOCKHOLM/LONDON, July 2 (Reuters) -France's antitrust regulator is set to charge Nvidia NVDA.O in relation to alleged anti-competitive practices, Reuters reported on Monday, making it the first enforcer to act against the computer chip maker.
The move comes after dawn raids by French authorities in September last year, which sources said targeted Nvidia. The raids were the result of an ongoing probe into the cloud computing industry.
The French authority and Nvidia declined to comment. European regulators have launched a string of actions seeking to prevent Big Tech companies from thwarting competition.
WHY IS NVIDIA IMPORTANT?
Nvidia makes graphics processing units (GPUs), chips that break down a computer task into smaller pieces and processes them together, making it faster than traditional methods.
The GPUs are highly sought by technology companies for their data centres, by video game console makers, and even by bitcoin miners to solve the complex math puzzles that earn them more cryptocurrency.
Nvidia has a near-monopoly of the GPU market with an 84% market share, leagues ahead of rivals Intel INTC.O and AMD AMD.O. With a market valuation of $1 trillion, Nvidia is also becoming crucial to fast-developing artificial intelligence (AI) technology.
Almost all computing systems used to power services like ChatGPT - OpenAI's blockbuster generative AI chatbot - use GPUs from Nvidia.
While GPU prices start from over $1,000, the ones favoured by AI companies can cost well over $10,000. Specialized AI systems from Nvidia such as DGX A100 start at $199,000, or the price of four Tesla Model 3s.
Oracle, for example, said it has been spending billions of dollars on Nvidia chips.
WHY IS FRANCE INTERESTED?
As well as hardware, Nvidia has an edge in the software side of the supply chain.
In an industry report issued last Friday, the French watchdog cited the risk of abuse by chip providers.
In particular, it raised concerns around the sector's dependence on Nvidia's CUDA chip programming software, the only system that is 100% compatible with the GPUs that have become essential for accelerated computing.
Companies risk fines of as much as 10% of their global annual turnover for breaching French antitrust rules, although they can also provide concessions to stave off penalties.
Britain's FCA also issued a report on the competitive functioning of the cloud computing sector last year, looking at the market dominance of cloud companies such as Amazon, Google and Microsoft and whether that affects competition.
In that report, the authority said several developments, such as large language models and cloud gaming, would potentially have an impact on the competitive functioning of the sector.
Nvidia has a presence in both sectors, and if any startup is planning to create an AI company, they would depend on Nvidia for the chips.
ARE OTHER COUNTRIES INVESTIGATING NVIDIA?
The U.S. Department of Justice is taking the lead in investigating Nvidia as it divvies up Big Tech scrutiny with the Federal Trade Commission, sources told Reuters.
In September, Bloomberg News reported the European Union was examining alleged anticompetitive practices in the AI chip industry, but has since confirmed there is no formal investigation into Nvidia.
Meanwhile the FCA is examining whether the competitors of big cloud companies are facing any obstacles.
The authority has tools to protect competition under the law of abuse of a dominant position, the law of cartels, abuse of economic dependence and concentration control, and the law on restrictive competition practices.
Reporting by Supantha Mukherjee in Stockholm and Martin Coulter in London; Additional reporting by Dominique Vidalon in Paris; Editing by Emelia Sithole-Matarise and Jan Harvey
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