Regulators and Rising Rivals Challenge Nvidia’s AI Dominance in China

Nvidia shares fell in early September 2025 as Chinese regulators announced a preliminary finding that the U.S. chipmaker had violated antitrust rules, adding to investor concerns over its exposure to geopolitical tensions and regulatory scrutiny. The State Administration for Market Regulation (SAMR) cited Nvidia’s 2020 acquisition of Israeli firm Mellanox Technologies as a point of contention, alleging that the company failed to comply with conditions attached to the deal approved in China. The antitrust probe coincided with broader U.S. export controls restricting access to advanced chips, which have already forced Nvidia to design China-specific products like the H20 and RTX Pro 6000D. Analysts noted that while the stock had remained bullish in the long term, the short-term drop reflected market unease over potential penalties and restrictions on operations in the world’s second-largest economy.

The regulatory pressure from China came as the Hang Seng Tech Index surged over 4% on Wednesday, marking its highest level in four years. The index, which tracks major technology firms listed in China Hong Kong, had risen by 45% year-to-date, driven by optimism over domestic advancements in artificial intelligence (AI) and semiconductors. Investors were increasingly confident in the ability of Chinese tech firms to develop competitive alternatives to U.S.-made chips, with companies like Huawei, Alibaba, and Baidu making progress in designing their own AI processors. The Cyberspace Administration of China (CAC) had already directed companies to halt testing of Nvidia’s RTX Pro 6000D, signaling a shift toward homegrown solutions. This move underscored Beijing’s broader strategy to reduce reliance on foreign technology, particularly in light of U.S. export restrictions and antitrust pressures.

Chinese chipmakers are making headway in the AI sector, with Huawei’s Ascend 910B and Alibaba’s Hanguang 800 already being used in cloud computing and data center operations. Baidu’s Kunlun chips are also seeing deployment in autonomous driving applications, while startups like Moore Threads and Enflame Technology are developing GPUs tailored for AI training. Despite these advancements, Chinese firms still face challenges in catching up with the most advanced U.S. designs, though the gap is narrowing. The push for self-reliance is also supported by government initiatives, including subsidies for industrial development and open-source AI model projects.

For Nvidia, the dual pressures from U.S. export restrictions and Chinese antitrust investigations have created an uncertain outlook in one of its key markets. In its recent earnings report, the company warned that it might struggle to design a competitive product for the Chinese data center market that would receive U.S. government approval. The firm’s CFO, Collette Kress, suggested that sales in China could reach $5 billion if the H20 chip received full authorization, but the company has removed China sales from its forward guidance due to geopolitical uncertainty. Meanwhile, the U.S. Department of Justice is also investigating potential antitrust issues in the U.S., raising additional compliance risks for the company.

Despite the near-term challenges, long-term analyst forecasts for Nvidia remain largely positive, with a 12-month price target of $208.59 implying a potential 17% upside from its current level. However, the company’s exposure to regulatory and geopolitical risks continues to weigh on valuation metrics, and investors are closely monitoring any changes in policy or enforcement actions. The outcome of SAMR’s investigation could result in fines, operational restrictions, or other penalties, depending on the severity of the findings.

The broader implications of the case extend beyond Nvidia, affecting other technology and semiconductor firms with exposure to China. Companies are now expected to reassess compliance strategies, particularly those involving conditional approvals and prior agreements. For global investors, the incident highlights the growing importance of regulatory risk in valuation models, especially in sectors where government policy plays a dominant role, such as AI and semiconductors. As the U.S. and China continue to navigate trade tensions and technological competition, the tech landscape is evolving rapidly, with homegrown solutions gaining traction and reshaping global dynamics.