Nvidia used to benefit from AI spending increases. So why did the stock just slide?

By Hannah Pedone

Investors seem worried about the potential for increased competition in the AI-chip market

Shares of Nvidia were down 4.6% on Thursday.

In theory, the numbers coming out of the latest Big Tech earnings reports would seem like good news for Nvidia. It's clear that big cloud companies are ramping their spending on AI chips, and Nvidia is the biggest player in that market.

Yet shares of Nvidia (NVDA) fell 4.6% on Thursday, with Wall Street seemingly concerned about heightened competition in the market for AI processors.

Morningstar analyst Brian Colello told MarketWatch that he thinks investors are worried about the recent progress Google has made on its tensor processing units and that Amazon has made on its custom Trainium chips.

"If both hyperscalers, plus Anthropic, are successful in deploying more and more TPUs and Trainium, then it could crowd out the potential opportunities for Nvidia beyond 2027," he said.

Nvidia's stock decline on Thursday came as shares of rivals Advanced Micro Devices (AMD) and Broadcom (AVGO), the latter of which partners with Google on the TPUs, rose 5.2% and 3%, respectively.

Read more: Big Tech's $700 billion spending on AI this year is called the 'greatest capital misallocation in history'

Seaport Research analyst Jay Goldberg told MarketWatch that he thinks investors may be misreading an announcement from Qualcomm (QCOM), which teased that it is preparing for a custom chip engagement with a hyperscaler later this year. He said investors could be interpreting the announcement as "one more Nvidia competitor entering the fray."

"I don't think Qualcomm really is that, but [we're] certainly seeing a lot of progress on Nvidia alternatives this week," he said, referring to Google's TPUs and Amazon's Trainium chips.

Goldberg also noted that recent news of DeepSeek moving to use Nvidia competitor Huawei's Ascend 950 AI chips for its V4 artificial intelligence model could be a factor weighing on the stock.

That said, Nvidia still has plenty of believers.

Tigress Financial Partners analyst Ivan Feinseth told MarketWatch that there's still plenty of room for Nvidia to cash in on robust data-center demand and benefit from the increasing capital-expenditure budgets mentioned by Alphabet, Meta, and Microsoft.

See also: Meta embodies everything Wall Street hates about AI right now

-Hannah Pedone

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