Why was Nvidia's French office raided?

Earlier, the European Union (EU) announced that it was collecting information about the dominance of large technology giants such as Nvidia in the internal market.

The French Competition Authority (FCA) said that in the early hours of September 26, they conducted a raid on the headquarters of a company in the “graphics card sector”. The French newspaper Challenges and the Wall Street Journal identified the company as Nvidia.

Nvidia's position

Nvidia is a manufacturer of graphics processing units (GPUs), chips that break down computer tasks into smaller parts that can be processed together, making the work faster than traditional methods.

Nvidia headquarters was raided last week. Photo: Reuters

Demand for GPUs is high due to tech companies boosting their data center businesses, the rise of the gaming market, and cryptocurrency miners needing powerful graphics processors to solve complex algorithms.

Nvidia has a near-monopoly on the GPU market with an 84% market share, far outpacing its closest rivals Intel and AMD. With a market valuation of $1 trillion, Nvidia has also become crucial to the rapidly growing field of artificial intelligence (AI).

Almost all of the computing systems used to power services like ChatGPT, OpenAI's blockbuster generative AI chatbot, use Nvidia GPUs.

GPUs typically start at $1,000, but those designed for AI tasks can cost as much as $10,000. Nvidia’s dedicated AI systems like the DGX A100 start at $199,000, which is about the price of four Tesla Model 3s.

Why does France care?

The FCA released a report earlier this year on the competitive function of the cloud computing sector. The agency is examining whether the market dominance of cloud companies such as Amazon, Google and Microsoft is having a negative impact on competition.

In the report, the regulator also highlighted several new developments, such as large language models and cloud gaming, that are likely to impact industry-wide competition.

Nvidia has a presence in both areas, and if any startup plans to start an AI company, they will need to rely on Nvidia for chips.

The FCA conducted an unannounced search and seizure of the chip company’s offices, with the judge’s permission. The agency said that whether the chip company had breached competition law could only be determined through a substantive investigation.

But the French authorities’ move could trigger a legal battle down the road. “In terms of the next steps, there will likely be court proceedings against the raid itself and the judge’s order authorizing the search,” said Charlotte Colin-Dubuisson, partner in antitrust and foreign investment at law firm Linklaters.

France has targeted several major tech companies in the past, including Google in 2021 for violating EU competition laws. The current focus of the investigations is on cloud computing.

(According to Reuters)

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