Why is France raiding a graphics card company?

A raid by French authorities of the offices of a technology firm named Nvidia in media reports is the latest among a string of such actions by European regulators as they look to check the dominance of Big Tech companies from thwarting competition.

The French competition authority (FCA) said on Wednesday it conducted the dawn raid a day earlier on a company in the “graphics cards sector”, it said. French newspaper Challenges and the Wall Street Journal identified the company as Nvidia.

Nvidia and the FCA declined to comment.

WHY IS NVIDIA IMPORTANT?

Nvidia makes graphics processing units (GPUs), chips that break down a computer task into smaller pieces and processes them together, making it faster than traditional methods.

The GPUs are highly sought by technology companies for their data centres, by video game console makers and even by bitcoin miners to solve the complex math puzzles and earn more cryptocurrencies.

Nvidia has a near-monopoly of the GPU market with 84% market share, leagues ahead of rivals Intel and AMD. With a market valuation of $1 trillion, Nvidia is also becoming crucial to fast-developing artificial intelligence (AI) technology.

Almost all computing systems used to power services like ChatGPT – OpenAI’s blockbuster generative AI chatbot – use GPUs from Nvidia.

While GPU prices start from over $1,000, the ones favored by AI companies can cost well over $10,000. Specialized AI systems from Nvidia such as DGX A100 start at $199,000, or the price of four Tesla Model 3s.

Oracle, for example, said it has been spending billions of dollars on Nvidia chips.

WHY IS FRANCE INTERESTED?

The FCA earlier this year issued a report on the competitive functioning of the cloud computing sector.

It was looking at the market dominance of cloud companies such as Amazon, Google and Microsoft and whether their market dominance affect competition.

In that report, the authority also highlighted that several developments, such as large language models and cloud gaming, would potentially have an impact on the competitive functioning of the sector.

Nvidia has a presence in both sectors, and if any startup is planning to create an AI company, they would need to depend on Nvidia for the chips.

The FCA carried out an unannounced visit and seizure at the premises after authorisation from a judge. Whether the company implemented anti-competitive practices could only be established by an investigation on the merits, it said.

“In terms of next steps after the initial raid, there will most likely be court proceedings against the raid itself and the order of the judge having authorised the raid,” said Charlotte Colin-Dubuisson, antitrust and foreign investment partner at law firm Linklaters.

In France, this is a separate proceeding before court, and can have an impact on the FCA’s case if the raid and/or the order is invalidated, Colin-Dubuisson said.

IS THE FCA INVESTIGATING OTHERS?

Various French authorities have looked at Big Tech companies previously, including issuing a fine to Google in 2021 for infringing EU competition law.

The FCA is examining whether the competitors of big cloud companies are facing any obstacles.

The authority has tools to protect competition under the law of abuse of a dominant position, the law of cartels, abuse of economic dependence and concentration control, and the law on restrictive competition practices.

It also thinks that some market failures would likely be addressed by regulations currently under discussion, such as the proposed EU Data Act.