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Nvidia Stock Falls on AI Spending Concerns, Rising Competition

Artificial Intelligence

Nvidia, Microsoft, Samik Chatterjee, Stock

Business Honor
18 December, 2024

Nvidia stock drops 1.2% amid concerns over slowing AI spending and rising competition.

NVIDIA(NVDA) sank 1.2% on Tuesday as the selling continued after that giant rebound in 2024 to briefly overtake Apple as the world's most valuable company. Shares continue lower amid increasing jitters over the prospect of an eventual slowdown or realignment toward other companies in Nvidia's AI spending fuel that led to its dramatic climb from a record closing high in early November of $148.88 to losses near 12%.

Nvidia's transformation from a graphics card company that was primarily used for gaming to a leader in AI chips has positioned it right at the heart of the generative AI boom. But a series of events has contributed to investor worries. Microsoft and Google both indicated their AI spending may not grow as rapidly in the future, adding to concerns that the market for AI chips could plateau. Besides these production delay fears, fear over overheating issues pertaining to Nvidia's new AI Blackwell servers have again impacted the stock price further.

Furthermore, the buying of networking company Mellanox for $7 billion by the NVIDIA company is facing questioning by China's competition authority and has initiated an investigation regarding the antitrust allegations raised against the deal. Meanwhile, the competition in the AI chip market is heating up. Amazon (AMZN) recently launched its new supercomputer and Trainium AI chips as a potential alternative to Nvidia's offerings. Broadcom (AVGO) is also on the move with its custom AI chips, XPUs, which are expected to fetch up to $90 billion in deals with hyperscalers over the next three years.

Despite a strong earnings report, Nvidia stock is in limbo, weighed down by the increasing fear of decelerating AI investments and stiffening competition. Nevertheless, JPMorgan's analyst Samik Chatterjee remains bullish as the AI spending will keep accelerating at a slow growth rate.