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Nvidia stock is slipping on fears that AI spending will decline and competition will increase

Nvidia stock is slipping on fears that AI spending will decline and competition will increase

Nvidia (NVDA) shares fell more than 2% early Tuesday as investors grew increasingly wary that the AI ​​spending that fueled the surge could slow or spill over to rivals.

Shares of the AI ​​chipmaker were down about 14% from their record closing price of $148.88 in early November.

Nvidia has made a rapid rise to the top, from a graphics card maker primarily used for video games to the world’s leading AI chip provider, while Big Tech is going all-in on generative artificial intelligence. In 2024, it tied Apple (AAPL) as the most valuable company in the world and replaced the once-dominant Intel (INTC) in the Dow Jones Industrial Average (^DJI) in early November. Wedbush analyst Dan Ives said in a note last week that he expects Nvidia’s market cap to exceed $4 trillion in 2025.

But after November’s record close, Nvidia shares began to fall after comments from Microsoft (MSFT) and Google (GOOG) suggested their AI spending would grow more slowly in the future. Rumors that the latest Blackwell AI servers were overheating fueled fears of further delays in production ramp-up and sent share prices even lower. Even Nvidia’s recent underwhelming earnings report, which exceeded the already high expectations of optimistic analysts, did little to improve the stock’s performance.

Nvidia office building in Santa Clara, California (AP Photo/Jeff Chiu)
Nvidia office building in Santa Clara, California (AP Photo/Jeff Chiu) · RELATED PRESS

Adding to Nvidia’s problems, China’s competition authority announced last week that it had opened an antitrust investigation into Nvidia’s $7 billion acquisition of networking technology company Mellanox.

The competition is now getting tougher. Amazon (AMZN) announced in early December that it was building a supercomputer using its new servers and its own Trainium AI chips – which the company hopes can become a viable alternative to Nvidia. Broadcom (AVGO) said in its latest earnings report that deals with hyperscalers to supply its custom AI chips called XPUs will bring in up to $90 billion over the next three years – sending the stock soaring and Nvidia’s opposite direction, despite analyst comments that Broadcom’s success will not come at the expense of Nvidia.

Big tech companies’ AI bills are still rising to huge sums, despite concerns that the companies are yet to see a meaningful return on their investments. Microsoft’s capital spending nearly doubled to $20 billion in its latest quarterly report from the same period last year, while Meta (META)’s spending rose 36% to $9.2 billion over the same period. Google’s capital spending rose 63% to $13 billion. At the same time, according to a recent Gallup poll cited by Bloomberg, only 4% of U.S. workers actually use AI on a daily basis.

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