Last week, Nvidia Corp. NVDA momentarily outpaced Microsoft Corp. MSFT to become the world’s most valuable company. However, the top spot was short-lived and the chip-making behemoth has since seen a staggering loss of investor money.
Nvidia’s valuation soared to a high of $3.34 trillion last week, only to plummet by over $500 billion when markets closed on Monday.
What Could Be The Driver: The reason could be the skittish investors, who are now left wondering if the chip-making giant — whose shares had been soaring due to its dominance in the AI market — has reached its peak.
And, to add to that the CEO Jensen Huang at the company’s annual shareholder meeting on Wednesday did little to assuage investor concerns about Nvidia’s capacity to stave off competitors and retain its leading position.
When Huang was asked about how Nvidia is addressing the tight market for semiconductor manufacturing capacity, he stated that the company "has the expertise and scale to develop a resilient supply chain." He added that Nvidia could enter into long-term supply agreements or prepay for manufacturing capacity to ensure it can meet customer demand.
But that was too little to pacify investors who were looking for more from Huang. Post the 30-minute event, Nvidia shares cracked nearly 4%. However, the company still managed to end the day 0.25% higher.
This was the second session when Nvidia closed the day in green, after a three-day losing streak that had wiped 13% off its share price.
The volatile movements appear to be more related to concerns about Nvidia’s valuation and some profit-taking, rather than any specific issues regarding its dominant position in providing chips for AI technology.
Multiplying Rivals: While tech luminaries like OpenAI’s Sam Altman and Tesla Inc.’s Elon Musk continue to regard Nvidia’s graphics processing unit (GPU) chips as vital to the AI boom, other tech powerhouses are developing their alternatives. Google unveiled its Arm-based CPU processor, Axion, in April, and Microsoft is also developing its own AI chips.
Huang did not offer any updates on the availability of Nvidia’s next-generation AI chip, Blackwell, which he previously hailed as “the most successful product” in Nvidia’s history. The absence of information on Blackwell’s price or availability since its introduction at the GTC conference in March has exacerbated investor apprehension.
Not only that, competition from smaller players is on the rise too. Etched, a start-up backed by PayPal co-founder Peter Thiel, recently raised $120 million and developed hardware that it claims outperforms Nvidia’s next-gen Blackwell chips. Another start-up, Groq, is reportedly on track to double its valuation to approximately $2.5 billion.
Expert Take: Analysts remain bullish about Nvidia’s growth. Citi Research analyst Atif Malik on Wednesday raised his price target for Nvidia from $126 to $150, while maintaining a Buy rating on the stock.
Constellation Research founder and principal analyst Ray Wang expects Nvidia stock to hit $200 per share in the next 12 months. Nvidia is in a dominant market share position for AI chips as the company is at least 24 months ahead of its competitors, Wang said.
Last week, BofA Securities noted that Nvidia currently holds at least 80% of the AI hardware market.
Nvidia did not immediately respond to Benzinga's request for comment.
Price Action: Nvidia’s shares were down 1.6% in premarket trading on Thursday after closing at $126.40 on Wednesday, according to Benzinga Pro.
Photos courtesy: Nvidia and Shutterstock
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