Nvidia Corp.’s stock fell below a key psychological level after earnings from major clients Amazon.com and Alphabet suggested the tech giants are becoming formidable competitors in the artificial intelligence chip market.
The Santa Clara, California-based company saw its shares drop 4.6% on Thursday to close below the $200 mark, a level it has struggled to maintain. The decline points to investor anxiety that the very companies that fueled Nvidia’s meteoric rise are now developing their own powerful, cost-effective alternatives to its GPUs, potentially slowing the chipmaker’s growth.
The sell-off erased a significant portion of the stock's recent gains, though it remains up nearly 79% over the past year. The retreat was compounded by sector-wide caution after memory-chip makers Sandisk and Western Digital saw their shares plunge 6.5% and 7.5% respectively, following their own disappointing earnings reports. Nvidia shares edged up 0.3% to $200.20 in pre-market trading Friday.
For investors, the breach of the $200 threshold is a critical test. After months of trading sideways, the stock had only sustained prices above this level since mid-April. The current dip raises questions about whether the rally has peaked, as the market weighs the dual threats of Big Tech’s in-house chip development and a potential cooling in the broader semiconductor cycle.
The primary driver for Nvidia's Thursday slide was the market's reaction to earnings from Amazon and Alphabet. Both companies, which are among the largest buyers of Nvidia's data center GPUs, highlighted their progress in developing proprietary AI silicon. Alphabet's stock surged 10% after its blowout quarter, which showcased the power of its own Tensor Processing Units (TPUs). This has led to speculation that Google could reduce its reliance on Nvidia and even challenge its market dominance.
Similarly, Amazon Web Services is seeing strong traction with its own custom AI chips, Trainium and Inferentia. While these tech giants will likely remain major Nvidia customers in the near term, their growing in-house capabilities create a long-term headwind and increase pricing pressure on Nvidia's high-margin products. The market is also reacting to heavy capital expenditure plans from Meta Platforms and Microsoft, which, despite strong results, signaled massive spending on AI infrastructure that investors fear may not generate immediate returns.
The negative sentiment around Nvidia was amplified by weakness elsewhere in the semiconductor industry. The sharp post-earnings drops for Sandisk and Western Digital signal that investor appetite for chip stocks, which have been on a tear, may be waning. This suggests a broader re-evaluation of valuations across the sector is underway.
Investors will be closely watching Nvidia’s own earnings report in May. The results will be a crucial indicator of whether the company can maintain its growth trajectory amid rising competition and a more skeptical market. The key question is how much of a blowout quarter will be needed to convince investors to look past the competitive threats and push the stock decisively above the $200 level.
This article is for informational purposes only and does not constitute investment advice.
