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Nvidia will seek EU antitrust approval for its acquisition of Israeli startup Run:ai due to concerns that the deal may threaten competition in markets which both companies operate.
The development comes after regulators especially in the EU and the US have been increasing their scrutiny on the AI sector deals to ensure fair competition.
The probe may slow Nvidia in meeting its timelines
The European Commission revealed a probe into the deal on Thursday, which is likely to force Nvidia to wait a bit longer before completing the transaction with the AI startup. According to a Reuters report, the EU antitrust enforcer’s move may require Nvidia to offer concessions to ensure approval of the deal.
Nvidia may not complete the deal without notifying the Commission and getting its approval. According to TechCrunch, the referral may, at a minimum, add a few more weeks to Nvidia’s original timelines.
But if the Commission notes some concerns about the deal, this may call for deeper investigations further delaying the acquisition by months.
The US chip-making giant announced the acquisition of the Israeli startup in April in a deal worth $700 million, a price tag that will be reviewed by the bloc following requests by Italian regulators under the EU Merger Regulation (EUMR). Run:ai’s technology lets developers and teams manage and optimize their AI infrastructure.
The probe into the deals comes after the Italian competition agency asked the EU watchdog to take a look at it and identify any competition risks.
The EU said it accepted the Italian request and has raised red flags over competition risks from the deal.
“The transaction threatens to significantly affect competition in the markets where NVIDIA and Run:ai are active, which are likely to be at least European Economic Area-wide and therefore include the referring country Italy.”
EU.
Nvidia has recorded soaring profitability and revenues in the past 12 months, thanks to its processors, which have become the gold standard in the chip industry due to their ability to power AI applications. This includes training models like OpenAI’s ChatGPT.
The proposed Nvidia – Run:ai deal does not meet EUMR standards
The transaction reportedly does not meet the standard notification thresholds for the EUMR. According to TechCrunch, the EU however allows a national regulator to notify a transaction to the Commission if it believes it may be bad for competition and affect trade within the bloc’s single market.
“Italy submitted a referral request to the Commission pursuant to Article 22(1) of the EUMR. This provision allows Member States to request the Commission to examine a merger that does not have an EU dimension but affects trade within the Single Market and threatens to significantly affect competition within the territory of the Member State(s) making the request,” wrote the Commission in a statement on Thursday.
Responding to the EU’s merger review by email, Nvidia spokesperson John Rizzo said the company was willing to answer any queries by regulators regarding the deal.
“After the acquisition closes, we’ll continue to make AI available in every cloud and enterprise, and help customers select any system and software solution that works best for them.”
Nvidia.
The Big Tech industry has enjoyed years of minimal oversight on its acquisitions of smaller rival firms and startups. This has however changed with regulators paying close attention to these deals to ensure fair competition.
Firms like Microsoft and Google have also been scrutinized for their investments in AI startups or other tech firms as they expand their AI operations and stay ahead of their peers. The EU has probed the partnership between Microsoft and OpenAI as well as others like Google and Samsung