Beijing Officials Yank a 2020 Skeleton Out of the Closet to Haunt Nvidia During U.S. Trade Talks

Jensen Huang just can’t catch a break, can he? Nvidia has once again been tossed into the middle of high-stakes negotiations between China and Donnie Politics. And this time, it’s not about another Chinese startup popping up and claiming it can replace Nvidia’s GPUs. Instead, Beijing’s regulators are dragging up Nvidia’s $7 billion Mellanox deal from 2020 and accusing Jensen of breaking anti-monopoly rules (oh sh*t, here we go again).

Now I know that most of us barely knew Nvidia even existed before 2023… but the Mellanox acquisition was one of those “boring but important” deals that helped build the chip empire we know today. Mellanox made the high-performance networking hardware that keeps data centers from turning into clogged traffic jams. Nvidia already had the GPUs (the brains of AI) but Mellanox gave them the ability to wire those brains together at insane speed. Think less “plumbing” and more “city grid.” Before Mellanox, Nvidia built the skyscrapers. After Mellanox, they owned the roads, the stoplights, and the power lines too.

China approved the deal back in 2020, but taped on a big “don’t be a dick” clause: don’t screw Chinese companies that rely on Mellanox hardware. In other words, if Tencent or Alibaba needed access, Jensen couldn’t pull a bouncer move at the velvet rope. Well here we are five years later, and suddenly Beijing’s like, “Actually, we think you did exactly that.” Obviously, this isn’t some sudden “gotcha” moment… it’s regulators reheating leftovers from 2020 and serving them up as today’s special.

(Source: CNBC)

For Chinese officials, the timing is perfect. Of course, Beijing drops its “preliminary ruling” the same week U.S. and Chinese negotiators are in Madrid arguing about tariffs, TikTok, and whether Donnie and Xi are gonna do a buddy-cop handshake at an October summit. If you think that’s a coincidence, I’ve got a beachfront condo in Cleveland to sell you. Washington had just told Nvidia and AMD, “Okay, you can sell some AI chips into China, but we’re taking a 15% cut.” Beijing’s clapback was to remind Jensen who actually holds the whistle and call a foul on a five-year-old play.

While Nvidia only slipped about 2% on the news, this could get ugly fast if Beijing decides to move past theatrics and actually clamps down on Nvidia’s access to the Chinese AI market. And we’ve already seen a preview of how that might play out. Earlier this year, regulators blocked shipments of Nvidia’s H20… the watered-down chip Jensen designed specifically to tiptoe around U.S. export restrictions. Oh and speaking of, Beijing also claimed “security risks” on those… suggesting those chips could be remotely shut down or used for tracking. Let me translate: “We don’t trust you, and also, Huawei would really like that revenue stream.”

Jensen, to his credit, hasn’t been a wimp about calling this out. He’s warned anyone who will listen that if American firms are locked out of China’s projected $50 billion AI market, domestic players like Huawei will gladly fill the gap. And he’s right… every new probe, every shipment ban, every regulatory issue buys Chinese competitors more time to catch up. In an industry where speed and scale matter more than anything, even a short delay can tilt the playing field.

As of now, Beijing hasn’t laid out what the punishment will be. It could be fines, it could be new restrictions, or it could just be leaving a regulatory sword dangling over Huang’s head while trade talks play out. But the bigger takeaway is hard to ignore… Nvidia isn’t just another chipmaker anymore. It’s a bargaining chip (maybe the bargaining chip) in the world’s most important economic rivalry.

At the time of publishing this article, Stocks.News doesn’t hold positions in companies mentioned in the article.