:max_bytes(150000):strip_icc()/GettyImages-2246882074-8dd6d1bc8c5444f5bb769f1f5a931a85.jpg "Nvidia’s Business Is Booming. Its Stock Is Falling. What Gives?")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2246882074-8dd6d1bc8c5444f5bb769f1f5a931a85.jpg)
Key Takeaways
- Nvidia shares have fallen since the company reported quarterly earnings last week that easily beat estimates. The stock has been hit by concerns that tech giants are overspending on artificial intelligence infrastructure.
- Reports that Meta is in talks to use Google’s custom AI chips added to concerns that Nvidia’s dominance in the market could be challenged.
Nvidia blew past high expectations when it reported quarterly results last week. Its stock is getting hit anyway.
Shares of the chip giant are down more than 8% since it reported record quarterly revenue and earnings and offered up an outlook that easily exceeded Wall Street’s expectations. As of Tuesday, the stock is trading about 17% below its record high from late October, when optimism about the AI boom helped make Nvidia the world’s first $5 trillion company last month.
Since then, it’s been among the stocks hit hardest by concerns about an AI bubble.
Why This Is Important
For the better part of three years, Nvidia’s earnings have been treated as a barometer for AI demand. The stock’s recent underperformance despite last week’s solid results reflect Wall Street’s shifting sentiment regarding the AI boom.
Some investors are worried that hyperscalers like Microsoft (MSFT) and Oracle (ORCL) will be left with a glut of data center capacity—and, potentially, piles of debt—if AI demand falls short of expectations. Others argue that, even if demand is as strong as Silicon Valley expects, the tech giants are still likely spending money inefficiently in their haste.
Nvidia has added to bubble fears by investing in several customers, including ChatGPT maker OpenAI and cloud provider CoreWeave (CRWV). Those deals have drawn comparisons to the vendor financing that helped to inflate the Dotcom Bubble of the late 1990s.
“If you define a ‘bubble’ as what we saw in 2008, leverage, speculation, and no underlying demand, that’s not what’s happening today,” said Carmen Li, founder and CEO of GPU market intelligence firm Silicon Data, in written comments. “But if you define it as pockets of overbuild or mispriced expectations about residual value, then yes, there are areas where investors should be cautious,” she added.
Nvidia stock has also been hit by concerns about its dominance in the AI chip market. Shares were down 6% in recent trading after The Information on Monday evening reported Meta Platforms (META) was in talks to spend billions on Alphabet’s (GOOG) AI chips for its data centers starting in 2027. Meta is also reportedly considering renting Alphabet chips as early as next year.
Microsoft, Amazon, Alphabet, and Meta have been working on custom chips for years in a bid to lower costs and lessen their reliance on Nvidia. Google’s talks with Meta, and the success of the former’s latest model, Gemini 3, have boosted hopes on Wall Street that those investments are paying off.
“We’re delighted by Google’s success,” Nvidia wrote on X Tuesday. “They’ve made great advances in AI and we continue to supply to Google. Nvidia is a generation ahead of the industry — it’s the only platform that runs every AI model and does it everywhere computing is done.”
Citi analysts in a note on Tuesday said they expected custom chips to account for 45% of the AI accelerator market by 2028, up from an estimated 35% today.
