Concerns about an AI bubble and increased competition are weighing on Nvidia as the stock fell to a three-month low on Wednesday.
Shares of the Santa Clara, California-based company tumbled more than 3% amid a broader decline for those chipmakers that are key to the artificial intelligence boom. Shares of Advanced Micro Devices and Broadcom were also down 4% and 5%, respectively.
In recent weeks, a slew of companies have made moves that could chip away at Nvidia’s domination as the go-to maker of chips for the AI industry. One such company, the Chinese-based MetaX Integrated Circuits, debuted an initial public offering on Wednesday and surged nearly 700%.
BEHIND NVIDIA’S DECLINE
Once a darling among stock market investors, the hits keep coming for Nvidia lately. Some of its chips are effectively banned in China, while the company has also become a poster child for concerns of a bubble in the AI industry that some investors worry is reminiscent of the dot-com bubble about 25 years ago. In late October, Nvidia became the first stock to be valued at more than $5 trillion.
Even though enthusiasm has cooled since then, some investors still worry that the stock prices of AI-related companies are completely disconnected from reality. And the constant rumblings of skepticism don’t show any sign of letting up as Nvidia has become a popular target for short-sellers.
Some prominent investors who have successful track records of calling other market declines have become vocal critics of the AI boom. Michael Burry and Jim Chanos are both shorting Nvidia stock, meaning they will make money if the price goes down further.
ANALYSTS SIGNAL OPTIMISM
Even so, UBS strategists this week put out a report projecting that global capital expenditure on AI could surge nearly 35% next year, to $571 billion. And the bank is projecting further gains through the end of the decade.
“We do not see evidence of an investment bubble,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a research note Tuesday, as reported by Barron’s.
“As AI adoption expands from consumer chatbots to broader enterprise and industry use cases, we estimate that the required compute capacity could be orders of magnitude greater than today’s installed base,” Haefele wrote.
What’s more, Bank of America analysts similarly say that the AI boom is still in its early days and has more runway for growth. Nvidia even tops the bank’s recommended list of AI stocks to buy in 2026, according to TheStreet.
But such positive reports did little to counter the negative sentiment surrounding Nvidia. The stock has tumbled more than 16% in the span of about two months.