A Balanced Viewpoint on NVIDIA's Antitrust Probe

The DOJ is coming down on NVIDIA. Is anyone surprised? Perhaps not a told you so moment, but yeah, told you so. In serious, I'm going to try to take a balanced and nuanced stab at what is going on here.?

Back in April I wrote an Op-ed in MarketWatch about the idea that NVIDIA is a monopoly running down the pros and cons of the idea. And while there were tea leaves to be drawn at the time, it was too soon.?

So how about now, just six months later and a trillion or so in market cap (well, that varies by the day...but)?

First of all, it is important that we come at this with logic. NVIDIA's biggest bulls will flat out call whatever is happening as some sort of attack against a company merely because it has built a great product, and it is being persecuted for its success.?

Yes, this could be the case. It could be a situation where its biggest competitors, its angriest customers, and a group of big-tech hating bureaucrats have hatched a plan to take down a company that is just too good at AI. Slowing down the market, leveling the playing field, and trying to play "Market God" by slowing down its meteoric rise.?

On the other hand, it could be something real. Something worth pursuing. And realistically without in any way suggesting that NVIDIA isn't the undisputed leader in AI factories still be pursuing action for business practices and behaviors that are deemed anti-competitive in some way, shape, or form.?

As I researched this topic, and when I wrote the op-ed, I came to the conclusion that there was certainly a significant asymmetry in the relationship between NVIDIA and many of its partners. The company had done so fantastically well at building a product, growing a base of AI software developers, and pulling demand from enterprises that it had the ability to basically call its shots with cloud providers and OEMs that couldn't meaningfully get into the AI game without access to NVIDIA systems. I'm talking AWS, Google, Microsoft, Tesla and others. DGX Cloud and Hopper were imperatives for them to be competitively in the AI story. And then we saw the likes of Dell, HPE, Lenovo, Super Micro all build and grow their infrastructure businesses on the back of incredible AI demand (with some optimization and engineering TLC that is often understated)?

And competition didn't really exist here. AMD Instinct is giving it a go. And Intel is well behind but has a small niche product today with Gaudi. The cloud providers are trying to build their own, and we have some pioneers and visionaries all talking about the building of custom chips. But the NVIDIA ecosystem is here today. Builders can build today and much of those things are either in their early days, lacking some part of the stack, missing enough developer buy in or the silicon is too rigid for meaningful competition. Suffice it to say--competition will come, but it isn't really here yet. And therefore, NVIDIA was positioned even better.?

And so, the whispers of NVIDIA becoming too big, too powerful and all of it happening too fast became a frequent and regular topic of discussion. I was getting calls from Fortune, NYT, and other mainstream media asking questions about this. Suggestions that bundling and price gouging was happening (without evidence) as well as concerns that pressure was being applied to OEMs and Cloud Providers that a lack of loyalty would mean a lack of access to parts--potentially making one cloud provider or OEM more powerful for buying in a more significant way. These types of negotiations were rumored (never verified), but it became the whisper in the industry.?

All the while, the competition is watching the market run away. And while we see some enthusiasm for AMD, Broadcom, and other third-party built open solutions. There is a firm understanding that having 90%+ of the GPU market and hardware being used by developers versed in CUDA is a sticking point. Abstractions to Pytorch and Jax have been a talking point for opening up hardware, but if the incredibly slow shift off of Intel x86 during what was a tough time for Intel, you could only wonder what the shift off of NVIDIA would look like if/when true competitive offerings hit the market. It would take, well, perhaps forever. Making the time now for a deeper look into the business. Which in some ways is what my dear friend Patrick Moorhead is calling anti-trust "Pre-Crime." I tend to agree and believe that there is very little to suggest any real anti-competitive behavior is taking place. Jealousy isn't real cause, and rumors will require hard proof. But the market is being cemented and the stakes are real so the line to make sure the practices were sound is probably warranted and the reality is if no wrong was done then hopefully this sorts itself out quickly.?

This saga will take some time. NVIDIA has changed the world. And changing the world always comes with some difficulty and struggle. And then some more. Let's see what winds up happening. But I do believe a nuanced and balanced viewpoint on this topic is warranted.