A probe by the US Department of Justice (DOJ) into Nvidia’s selling practices will likely go nowhere, Scott Bickley, advisory practice lead at Info-Tech Research Group, predicted Friday.
On Thursday, Reuters first reported findings of an earlier published report that “DOJ investigators are looking at whether Nvidia pressured cloud providers to buy multiple products,” and in a follow-up article stated that 10 progressive groups, and Democratic Senator Elizabeth Warren, have also asked the DOJ to investigate the company, citing its “dominance of the market for the chips driving the artificial-intelligence boom.”
In a joint letter to Assistant Attorney General Jonathan Kanter, sent on Tuesday, the groups welcomed news of plans to open an antitrust investigation into Nvidia.
They stated that the company “has made it clear that it intends to ride the AI wave as long and as far as it can, and its astonishing dominance in GPU accelerator chips — it now holds an 80% overall global market share in GPU chips and a 98% share in the data center market — puts it in a position to crowd out competitors and set global pricing and the terms of trade. Given the integral part technology plays in contemporary life, this constitutes a dire danger to the open market, and well deserves DOJ scrutiny.”
Bickley said that the real reason for any investigation is the “battle of mega corporations currently going on. Basically, you have the hyperscalers who are the largest consumers of Nvidia’s GPUs. They’re also trying to develop their own version of GPUs. And no one in the world has been successful at displacing Nvidia in this marketplace. They have close to 90% market share. So Nvidia is pulling levers to drive their revenue and ancillary products and services like the CUDA platform, like their cabling, like their server racks.”
The company’s biggest customers, he said, “are fighting back and saying, ‘we want to do it our way, we need you to adapt, we want the number and quantity of chips we want.’ You have these battles going on.”
According to Bickley, anything related to an antitrust probe is “more hype than substance at this point, because, first, semiconductors are the most volatile sector in the stock market. [Nvidia CEO] Jensen Huang knows full well that this wave that they’re riding at the end of the day will crest, and it will crash, and it will happen violently when it does. They are squeezing everything they can out of the short runway and they are trying to elongate that runway as much as possible.”
As for the DOJ, he said, “if you have reputable names complaining, they are going to take a look at it, but under the Biden administration, the department has been extraordinarily unsuccessful in about every antitrust action they’ve decided to take on. Just because they’re looking at it doesn’t mean they’re going to do anything about it.”
“[By the time] they do something about it, and the time that it takes to resolve, this cycle will have already crested, in my opinion. The money will already be made, the damage will already be done … The reality is that we are talking about an anti-competition inquiry for a product that there is really no competition for.”
That is, he said, “the first thing that comes to my mind. The second is, is they (DOJ) may attack the CUDA platform, which only works for development on Nvidia GPUs. The EU has a practice of saying ‘you can’t do this; you have to make your platform open.’ I think that’s arguable. But why would a platform designed to support a specific piece of hardware have to support other people’s hardware?”
The DOJ could force them to do that, and what Nvidia then might do, said Bickley, is develop an alternative platform that will ultimately be less effective on non-Nvidia products in order to comply.
“And the reality is this, and I will use the Adobe example,” he said. “If I’m a graphic designer, and I go to school, and I’m trained on Photoshop, and it integrates with the other Adobe suite of products you can’t make me use Corel Painter to do what Photoshop does and think I’m not going to go find another job.”
It’s the same thing with developers in the GPU space, he said. “They only want to learn one platform; they don’t have the bandwidth to learn up on multiple platforms. The lock-in is real, and by the time these things [antitrust probes] come around to any sort of fruition, the ecosystem is going to be pretty much set in stone.”
