Nvidia shares tick lower premarket amid doubts over chip giant’s AI dominance
Investing.com - Shares of Nvidia inched lower in premarket U.S. trading on Wednesday, suggesting a possible extension to losses from the prior session, as fresh concerns swirled around the semiconductor giant’s dominance over the artificial intelligence chip market.
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Nvidia, whose place at the center of the AI boom has fueled a meteoric rise in its shares in recent years, fell by 2.6% on Tuesday. For the month, the stock has slid by 12%.
The decline appeared to underline what has become a growing split in an AI trade that has long been characterized by names exposed to the nascent technology moving largely in unison.
Alphabet’s shares edged higher before the start of U.S. trading, as the Google parent flirts with touching a $4 trillion market value. Following a 1.6% rise in the prior session, the stock has climbed by 15% this month.
Underpinning the move higher was a media report that Alphabet was in talks with Meta to supply Google’s AI-focused chips to the Facebook owner’s data centers. Google, which was already bolstered by a warm reception to its Gemini 3 AI model earlier this month as well as an investment from Warren Buffett’s Berkshire Hathaway, has been racing to carve out its place as a maker of AI processors, partially in a bid to reduce its reliance on third-party vendors.
In a note to clients, analysts at Citi said Google’s AI products and services are "gaining market share," adding that this position could be reinforced by its sizeable operations catering to billions of monthly active users.
Observers flagged that Google’s ambitions could spell intensifying competition for Nvidia. The news also threatened to exacerbate worries around a slew of circular deals in the AI sector, many of which revolve around Nvidia providing funds to customers who are in turn spending heavily on its AI chips.
While Nvidia’s share price has risen by over 29% over the past one-year period, sentiment around it -- and indeed the wider AI sector -- has been dented by fears such dealmaking could fuel an AI "bubble" reminiscent of the dot-com bust more than two decades ago.
Nvidia has reportedly moved to respond to criticism and bets against the company, notably by Michael Burry, the investor who was famously profiled in the book and film "The Big Short." The Wall Street Journal said Nvidia stressed that its underlying business model was "economically sound" and its reporting practices "complete and transparent," although analysts cited by the paper said the comments made the firm seem "defensive."