TLDR:
- Nvidia shares dropped 1.7% in premarket trading as Meta and Microsoft prepare to release earnings
- Super Micro Computer issued a warning about delayed customer decisions, potentially related to Nvidia’s chip transition
- Huawei is developing a new AI processor that could challenge Nvidia in certain markets
- Market analyst Stephen Guilfoyle has sold his Nvidia holdings due to industry shifts
- Tech companies are increasingly developing their own chips or diversifying suppliers
Nvidia its stock fall 1.7% in premarket trading Wednesday to $107.20, following a modest 0.3% gain during Tuesday’s regular session.
Investors are keeping a close eye on earnings reports from Meta and Microsoft, set to be released today. These reports could provide key insights into future AI spending plans.
The capital expenditure forecasts from these tech giants will be particularly important for Nvidia. Strong investment commitments would signal continued demand for Nvidia’s AI chips.
But recent developments have raised questions about Nvidia’s market position. Super Micro Computer, which builds servers using Nvidia chips, issued a warning that its quarterly results would miss expectations.
Super Micro pointed to “delayed customer platform decisions” as the cause. This suggests customers may be pausing purchases while waiting for Nvidia’s new Blackwell processors instead of buying systems with the current Hopper architecture.
New Competitors Enter the Field
While Nvidia manages this transition, competition is heating up. Huawei is preparing to launch what it describes as its most powerful AI processor yet.
The Chinese tech company appears to be directly targeting Nvidia’s market. This comes at a time when U.S. restrictions limit Nvidia’s ability to sell advanced chips to Chinese customers.
Huawei is working to fill this gap in the Chinese market, potentially capturing share that might otherwise belong to Nvidia.
The competitive pressure isn’t just coming from overseas. Veteran market analyst Stephen Guilfoyle recently revealed he has exited his long-held positions in both Nvidia and AMD.
“I got out of both of those names, I had whittled down those positions as they eroded,” Guilfoyle explained. His decision wasn’t due to lack of confidence in Nvidia’s leadership but rather his assessment of changing market conditions.
Tech Giants Change the Game
Hyperscalers in the U.S. are increasingly looking to diversify their chip suppliers or create their own chips. Companies like Apple and Amazon have made major strides in developing custom silicon.
This trend puts pressure on Nvidia’s pricing power. “I don’t think they have pricing power the way they once did,” noted Guilfoyle.
Amazon CEO Andy Jassy confirmed this shift in a recent letter to shareholders. While stating that AI investment remains strong, he also mentioned that Amazon now makes many of its own chips.
This changing dynamic affects the entire semiconductor market, especially companies that have benefited from the AI boom like Nvidia.
Other chip stocks showed weakness in premarket trading as well. AMD was down 0.7% and Broadcom fell 0.6%, suggesting broader sector concerns.
For Nvidia investors, the path forward depends on several factors. The company needs to successfully roll out its Blackwell architecture and maintain its technological leadership in the AI space.
It must also navigate the changing customer landscape as more companies develop in-house capabilities or seek multiple suppliers for critical components.
The market will be watching Meta and Microsoft’s earnings closely for signals about future AI infrastructure spending. These reports could provide short-term direction for Nvidia’s stock price.
