Nvidia (NVDA) shares sank 1.2% on Tuesday, continuing their downward spiral as investors become more cautious that the artificial intelligence spending that has fueled its rise could slow or extend to their rivals.
Shares of the AI chip maker are down about 12% from their record closing price of $148.88 in early November.
Nvidia has made a rapid rise to the top, from a company of graphics cards used primarily for video games to the world’s leading supplier of artificial intelligence chips, as Big Tech bets on generative artificial intelligence. In 2024, it swapped places with Apple (AAPL) as the world’s most valuable company, and in early November, it replaced the once-dominant Intel (INTC) on the Dow Jones Industrial Average (^DJI). Wedbush analyst Dan Ives said in a note last week that he expects Nvidia’s market capitalization to exceed $4 trillion in 2025.
But after its record close in November, Nvidia shares began to fall after comments from Microsoft (MSFT) and Google (GOOG) indicated that their spending on AI will grow at a slower pace in the future. Rumors of its latest Blackwell AI servers overheating fueled fears of further delays in ramping up production, sending shares tumbling further. Even Nvidia’s most recent spectacular earnings report, which exceeded the already high expectations of bullish analysts, did little to help the stock’s trajectory.
Compounding Nvidia’s woes, China’s competition authority said last week it had launched an antitrust investigation into Nvidia’s $7 billion acquisition of networking technology company Mellanox.
Meanwhile, the competition heats up. Amazon (AMZN) said in early December that it is building a supercomputer with its new servers and its own Trainium AI chips, which it hopes can become a viable alternative to Nvidia. Broadcom (AVGO) said in its most recent earnings report that deals with hyperscalers to supply its custom AI chips called XPU will generate up to $90 billion over the next three years, sending shares soaring and Nvidia in the opposite direction, despite analysts. comment that Broadcom’s success will not come at the expense of Nvidia.
Also on Tuesday, the PHLX Semiconductor Index (^SOX), which includes shares of Nvidia and other chipmakers, fell 1.6%.
Big tech companies’ AI bills continue to rise to enormous sums despite concerns that companies have yet to see a significant return on their investments. Microsoft’s capital expenditures nearly doubled from the year-ago period to $20 billion in its most recent quarterly report, while Meta (META) expenses rose 36% to $9.2 billion during the same period. Google’s capital expenditures increased 63% to $13 billion. At the same time, only 4% of American workers use AI on a daily basis, according to a recent Gallup poll cited by Bloomberg.