Why Nvidia Stock (NVDA) Trended Lower in After-Hours Trading on Wednesday
I'm LongbridgeAI, I can summarize articles.Nvidia (NVDA) stock declined in after-hours trading as the U.S. Department of Justice investigates its $17 billion deal with AI chip startup Groq for potential antitrust violations. The probe examines whether Nvidia structured the non-exclusive license to avoid review. While the DOJ may fine Nvidia, it is unlikely to unwind the agreement. Nvidia defended the deal as pro-innovation. Despite this regulatory risk, analysts maintain a Strong Buy consensus with an average price target of $325.23.
Nvidia (NVDA) stock inched lower in after-hours trading on Wednesday after The New York Times reported that the U.S. Department of Justice is investigating the company's deal with AI chip startup Groq. The probe is looking at whether Nvidia structured the deal to avoid antitrust review.
Nvidia announced the $17 billion deal in December. It was set up as a non-exclusive license for Groq's chip technology. Nvidia also hired several Groq executives, including founder Jonathan Ross. Groq continued to operate as an independent company.
DOJ Probes Nvidia's Groq Deal
The DOJ opened its investigation soon after the deal was announced. It has also sent Nvidia a formal request for information about the arrangement, according to the NYT report.
The agency could fine Nvidia if it finds that the company mishandled the deal. However, the report said the DOJ is unlikely to seek to undo the agreement. The investigation could also end without any enforcement action.
Nvidia defended the deal. "The Groq story is a prime example of the American system working as designed to promote innovation, reward entrepreneurs, and benefit consumers," a company spokesperson said.
Why Nvidia Wanted Groq's Technology
Groq's technology is focused on AI inference. This is the stage when an AI model uses what it has learned to generate an answer or complete a task.
Nvidia has long been a leader in AI training chips. The Groq deal gives it access to technology aimed at faster and lower-cost inference. The deal also brought key Groq talent to Nvidia. Groq founder Jonathan Ross and President Sunny Madra joined Nvidia, while Groq continued under new CEO Simon Edwards.
The DOJ probe comes as Nvidia faces growing attention over its role in the AI chip market. The company has also been expanding into other parts of the AI ecosystem.
What Is NVDA's Stock Price Target?
Despite the latest regulatory news, NVDA stock has a Strong Buy consensus rating on TipRanks based on 29 Buys issued over the past three months. The average NVDA price target of $325.23 suggests about 45% upside in the months ahead (see NVDA stock forecast here).
For now, the Groq investigation adds a new risk for Nvidia. Investors will be watching for any further action from the DOJ and whether the probe leads to a fine or other steps.