There’s no question that Nvidia (NASDAQ: NVDA) has been the leader of the artificial intelligence (AI) revolution thus far. The stock jumped by nearly 10 times since the start of 2023, shortly after the launch of ChatGPT.
It rose to become the most valuable company in the world this year, though it has since ceded that position to Apple. Nvidia’s strength was on display in its latest earnings report as the company delivered another round of blowout results. Revenue jumped 94% to $35.1 billion, and adjusted net income doubled to $20 billion, or $0.81 a share.
Nvidia shares peaked after that third-quarter earnings report on Nov. 21 at a share price of $152.89. However, something surprising happened shortly after that. Nvidia stock started to slide even as the broad market continued to gain as investors seemed to believe that the valuation had again become too inflated. As of Dec. 17, less than a month later, the stock is now down 15% from that peak after falling for four straight sessions in a row.
There hasn’t been any significant news that’s caused Nvidia’s slide and no particularly large one-day moves. Perhaps the biggest item was that China opened an anti-monopoly investigation into the company, according to Bloomberg, regarding its 2019 acquisition of Mellanox, which makes networking products for servers and storage equipment.
Concerns about a shift in AI spending away from Nvidia’s core, increased competition, and the reality that AI has still yet to break through at the consumer or end-user level has weighed on the stock.
The stock also pulled back after Broadcom gave strong AI guidance in its fiscal fourth-quarter earnings report last week. While Broadcom doesn’t compete directly with Nvidia, its results, which included 220% AI growth in 2024 and guidance of 65% growth in the first quarter, show that the spoils in the AI race may be finally starting to spread beyond Nvidia.
Investors, especially those sitting on significant profits in Nvidia, may finally be sensing that it’s time to diversify into other chip stocks.
Despite the stock’s pullback after the initial earnings pop, Nvidia’s prospects still look just as strong as they did when the company reported earnings a month ago.
It’s solved the overheating problems that had delayed the launch of the new Blackwell platform and continues to see demand that is vastly outstripping the supply of its new components. CEO Jensen Huang described demand for Hopper and the new Blackwell platform as “incredible,” and CFO Colette Kress said Blackwell demand would exceed supply for several quarters into fiscal 2026, or next calendar year.
