🚫 ANTITRUST

Nvidia Nvestigated

To paraphrase The Social Network, you don't get to a three trillion-dollar market valuation without making a few enemies. In this case, it's Nvidia becoming the multi-trillion dollar firm, and it's the DOJ that's the enemy.

As Bloomberg reports, the Justice Department has sent subpoenas to the AI chipmaker in an escalation of its inquiry into whether the company violated antitrust laws.

"Officials are concerned that the chipmaker is making it harder to switch to other suppliers and penalizes buyers that do not exclusively use its artificial intelligence chips," Reuters adds.

A spokesperson for Nvidia stated that the company "wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them."

But the DOJ is not convinced.

"In the inquiry, regulators have been investigating Nvidia’s acquisition of Run:ai, a deal announced in April. That company makes software for managing AI computing, and there are concerns that the tie-up will make it more difficult for customers to switch away from Nvidia chips," the Los Angeles Times explains. "Regulators also are inquiring whether Nvidia gives preferential supply and pricing to customers who use its technology exclusively or buy its complete systems, according to the people."

To aid in its investigation, the DOJ has also questioned Nvidia rivals like AMD, and how the chipmaker was able to captivate roughly 90% of the market seemingly overnight, reports Fast Company.

And it's not just American authorities tracking Nvidia, the French antitrust officials are too. Last September, the company's regional offices were raided by French police in connection with the investigation and a report the French antitrust agency published earlier that summer on Nvidia's cloud computing dominance.

However, Shawn Collins, a partner at Stradling Yocca Carlson & Rauth, told Fast Company: “I’m not as worried about [the probe] because I remember when everybody thought that Microsoft was just too big for anyone to compete with them, and the antitrust regulators were scrutinizing them in the early ’90s. …Now, Microsoft is one of many computer companies in the world.”

INFLUENCER

Amidst the investigations of Nvidia, CNBC labeled the company"the world's 'most important' stock". In essence, Nvidia's quarterly earnings calls are the most influential market-mover outside a Fed decision.

To that end, the chipmaker's legal woes are compounded by investors' growing realization that Nvidia cannot grow at its meteoric clip forever. Over the first 2 trading days, the company erased some $300 billion from its value.

VERDICT

While Nvidia has been the beneficiary of certain good luck with its chips, any attempts to use its dominance to trap customers into using its product are anti-competitive. Should the DOJ and/or French authorities find evidence of such behavior, Nvidia might see its dominance luck shift.

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🤳🏼 SOCIAL MEDIA

Exing X

If your dream is to scroll X on the beaches of Rio, well, we have bad news (and also, we have some questions about your dream): the Brazilian Supreme Court upheld a total ban of the social media platform this week.

The ban stems from a Brazilian law that requires X to have a legal representative in the country. Yet, Elon Musk, X's owner, refused to comply.

X “seems to believe it’s above the law… Economic power and the size of a bank account do not give rise to outlandish immunity," Flavio Dino, one of the Brazilian justices wrote of the decision, reports the New York Times.

But not everyone agrees. Jameel Jaffers, executive director of the Knight First Amendment Institute at Columbia University, told the Times that what bothers him is that "increasingly, undemocratic governments can point to democratic ones to justify their actions. …Where there are narrower ways of addressing privacy concerns or misinformation concerns, governments should use those narrower means.”

Fábio de Sá e Silva, a professor of Brazilian studies at the University of Oklahoma, pushed back: “The world looks at Brazil now and sees something is being done there to push back. It might encourage some other countries to do the same.”

But Brazil went a step further than just banning X. As The Guardian reports, a Brazilian judge " blocked the local bank accounts for Musk’s satellite and internet provider Starlink. The aim was to enforce fines imposed on X," which totalled over $18 million as of August.

Starlink initially chose not to comply with the freeze and the court-ordered blocking of X, but, according to CNBC, the company recently stated that "regardless of the illegal treatment of Starlink in freezing of our assets, we are complying with the order to block access to X in Brazil. We continue to pursue all legal avenues, as are others who agree that @alexandre’s recent orders violate the Brazilian constitution."

FREE SPEECH

Musk's troubles in Brazil began when the government asked X to block certain accounts it deemed dangerous. Musk refused to do so. Yet, as The Verge writes, In April 2022, Musk posted on what was then called Twitter: "By 'free speech', I simply mean that which matches the law. I am against censorship that goes far beyond the law. If people want less free speech, they will ask government [sic] to pass laws to that effect. Therefore, going beyond the law is contrary to the will of the people." The inconsistency of Musk's actions toward hate speech on X has been a major contributor to the refusal of companies to advertise of the platform.

VERDICT

With mounting litigation and cratering revenue, Musk has found that X is not the shiny toy he thought he was buying. But the refusal to comply with Brazilian law in order to keep his platform available to one of the world's largest countries is a self-inflicted wound. Moreover, if the recent arrest of Telegram's founder in France is any warning, Musk may want to stay out of Brazil for awhile.