Nvidia Stock falls amid AI spending concerns and rising competition
Nvidia (NVDA) shares fell more than 2% on Tuesday as investor concerns grew over a potential slowdown in AI-related spending, which has been a key driver of the company’s meteoric rise.
The stock is now down approximately 14% from its record high closing price of $148.88 in early November. Nvidia, once primarily a graphics card maker for the gaming industry, has transformed into the world’s leading supplier of AI chips, benefiting from Big Tech’s aggressive push into generative artificial intelligence.
In 2024, Nvidia overtook Apple (AAPL) as the world’s most valuable company and replaced Intel (INTC) in the Dow Jones Industrial Average (^DJI) in November. Wedbush analyst Dan Ives recently projected that Nvidia’s market cap could surpass $4 trillion by 2025.
However, following its record close, the stock began to slide amid signals from Microsoft (MSFT) and Google (GOOG) that their AI spending growth could decelerate. Additional concerns surfaced regarding Nvidia’s latest Blackwell AI servers, with rumors of overheating causing delays in production ramp-up, further dampening investor confidence. Even Nvidia’s blockbuster earnings report, which exceeded Wall Street’s bullish expectations, failed to reverse the stock’s downward trend.
Adding to the headwinds, China’s competition authority last week launched an antitrust investigation into Nvidia’s $7 billion acquisition of networking technology company Mellanox, intensifying regulatory scrutiny.
At the same time, competition in the AI chip market is escalating. Earlier this month, Amazon (AMZN) unveiled plans to build a supercomputer powered by its Trainium AI chips, which the company hopes will provide an alternative to Nvidia’s dominance. Broadcom (AVGO) also recently announced that custom AI chip deals with hyperscale clients could generate up to $90 billion over the next three years, sending its stock soaring while Nvidia’s dipped. Analysts have noted, however, that Broadcom’s gains are unlikely to directly undercut Nvidia’s market position. On Tuesday, the broader PHLX Semiconductor Index (^SOX), which tracks Nvidia and other chipmakers, fell nearly 2%, reflecting a cautious outlook for the sector as competition heats up and spending trends face closer scrutiny.
