China just made a move that escalates the US chip war

China launched an antitrust investigation against Nvidia, the company that builds a large cut of the chips that power AI systems. Reuters said the move is widely seen as retaliatory.

The Wall Street Journal reported that Nvidia shares fell 2.3% in midday US trading after the announcement. However, the stocks bounced back and were up over one point two days later.

According to Reuters, Chinese regulators accuse the company of violating the country's anti-monopoly laws and commitments from purchasing Israeli chipmaker Mellanox Technologies.

However, the news agency clarified that the State Administration for Market Regulation did not explain how the company allegedly violated the law. Most experts believe it is only part of a strategy.

The move escalated an already intense and long-running war between China and the US over the chip market.

Reuters said the investigation could be a response to recent US export limits. According to the WSJ, China has a pattern of using its regulators to express displeasure with US export limits.

The limits are part of a Biden Administration push to counter China's growing influence. Chips are crucial to that war because they are vital for the production of AI and military equipment.

The Biden Administration has limited the export of semiconductors, essential materials for chip construction, and other technology and imposed tariffs on Chinese products.

The most recent US regulation restricted sales to 140 companies, including Chinese chip firms Piotech and SiCarrier, The Guardian explained.

"The United States has taken significant steps to protect our technology from being used by our adversaries in ways that threaten our national security," National Security Adviser Jake Sullivan told the media.

The US also passed the Chips Act to bolster local production of the vital components. According to The New York Times, it included a $280 billion manufacturing investment.

Since the law passed in 2022, both countries have engaged in a back-and-forth of restrictions, fueling a battle to dominate technological production.

Reuters said tensions have been gradually growing, and experts expect them to increase further as President-elect Trump takes control. The latest Chinese probe is proof.

According to the WSJ, the consequences of the antitrust investigation against Nvidia could be fines of up to 10% of their revenue from the previous year. It could push the US to the negotiating table.

However, Ian Bremmer, president of political risk consulting firm Eurasia Group, told the newspaper that the move would only work if the new administration is willing to negotiate.

Bremmer told the WSJ that is still unclear. President-elect Trump has filled his cabinet with hardliners and promised up to 60% tariffs on Chinese goods.

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