The U.S. Department of Justice (DoJ) has set its eyes on Nvidia (NVDA), the leader in artificial intelligence (AI) chip technology with an estimated market share of over 80%. The regulator is investigating whether NVDA’s contracts and partnerships have led to unfair advantages and stifled competition. Sources reveal that DOJ has questioned Nvidia about its partnerships, but no subpoenas have been issued yet.
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Reports on this investigation have affected Nvidia’s stock, which fell about 14% last week following claims of a DOJ subpoena related to the antitrust probe. However, Nvidia has denied receiving any subpoenas.
In its defense, Nvidia attributed its market dominance to the superior AI computing capabilities of its products. The company also pointed to its strong financial performance over recent quarters and high customer satisfaction as evidence of its success.
Regulators Intensify Scrutiny on AI Companies
It is worth highlighting that the Federal Trade Commission (FTC) is undertaking similar investigations. Earlier this year, the FTC launched a probe on investments made by Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL) in promising AI startups. The goal is to assess whether these investments gave these tech giants unfair advantages over their competitors in the expanding AI sector.
Importantly, antitrust officials are concerned that a few companies could gain control over crucial aspects of AI, much like Google and Facebook do with internet searches and social media. They are worried about the concentration of power in the AI industry, especially as companies like Nvidia generate significant profits.
As the AI industry continues to evolve rapidly, regulatory scrutiny is likely to remain a significant factor.
What Is the Price Target for NVDA?
Wall Street analysts are bullish about Nvidia stock. The stock has 39 Buys and four Hold recommendations for a Strong Buy consensus rating. The analysts’ average price target on NVDA stock of $151.79, implies 47.61% upside potential from current levels. NVDA stock has gained about 108% year-to-date and outperformed the Nasdaq 100’s (NDX) over 9% gain.
