NVIDIA shares (NVDA) fell 1.2% on Tuesday, continuing its downward spiral as investors become cautious that the artificial intelligence spending that fueled its rise could ease or spread to rivals.
Shares of the AI chipmaker are down about 12% from their record closing price of $148.88 in early November.
Nvidia has made a rapid rise to the top, going from a maker of graphics cards primarily used for video games to the world’s leading supplier of AI chips, as Big Tech goes all-in 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) in 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 started to fall after Microsoft comments (MSFT) and Google (GOOG) indicated that their AI spending would increase at a slower rate in the future. Rumors of overheating of its latest Blackwell AI servers have fueled fears of further delays in ramping up production, cause stocks to fall even further. Even the newest from Nvidia explosive profits reportwho has exceeded the already high expectations of bullish analystsdid not contribute to improving the stock’s trajectory.
Adding to Nvidia’s problems, China’s competition authority said last week that it had launched an antitrust investigation in Nvidia’s acquisition of networking technology company Mellanox for $7 billion.
Meanwhile, competition is intensifying. Amazon (AMZN) announced in early December that it was building a supercomputer with its new servers and its own Trainium AI chips – which we hope to become a viable alternative to Nvidia. Broadcom (AVGO) said in its latest earnings report that it deals with hyperscalers to provide its custom AI chips called XPU will bring in up to $90 billion over the next three years – sending the stock skyrocketing and Nvidia’s in the opposite direction, despite analyst comments that Broadcom’s success won’t come at Nvidia’s expense.
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 reach huge sums despite concerns that businesses have yet to see a significant return on investment. Microsoft’s capital spending nearly doubled from last year, reaching $20 billion in its latest quarterly report, while Meta’s (META) spending increased 36% to $9.2 billion over the same period. Google’s capital spending jumped 63% to $13 billion. At the same time, only 4% of U.S. workers actually use AI daily, according to a recent Gallup poll cited by Bloomberg.