China's market regulator announced on Monday that a preliminary investigation found Nvidia (NVDA.O) had potentially violated the country's anti-monopoly laws, marking the latest challenge for the U.S. chipmaker. The State Administration for Market Regulation (SAMR) did not provide details on how Nvidia, known for its AI and gaming chips, may have breached these laws.

The probe, which began in December, was widely interpreted as a response to U.S. restrictions on China’s chip sector. The regulator also indicated that Nvidia might have failed to uphold commitments made during its acquisition of Israeli chip designer Mellanox Technologies, which was conditionally approved in 2020. SAMR said it will continue its investigation. Nvidia has not yet commented.

Under China’s antitrust law, companies can face fines ranging from 1% to 10% of their previous year’s annual revenue. Nvidia reported $17 billion in revenue from China in the fiscal year ending January 26, accounting for about 13% of its total sales. Following the announcement, Nvidia’s shares fell 2% in pre-market trading. The announcement comes amid ongoing U.S.-China trade talks in Madrid, where chip sales, including Nvidia’s, are expected to be discussed. Access to advanced AI chips remains a major point of contention in the tech rivalry between the two countries.

Nvidia, a leading producer of AI chips, has been heavily affected by this dynamic. While the Trump administration had previously imposed strict restrictions on the sale of advanced chips to China, some of these rules were later eased. Meanwhile, China aims to reduce its reliance on U.S. chips. Authorities have summoned Chinese firms such as Tencent (0700.HK) and ByteDance to explain their purchases of Nvidia’s H20 chip, citing concerns over data security and information risks. Last month, China’s cyberspace regulator also questioned Nvidia representatives about whether the H20 chip, specifically designed for China, could contain backdoor vulnerabilities affecting user data and privacy.