Nvidia Stock Drops: 3 Things Hurting the AI Chip Maker

Nvidia Stock Drops: 3 Things Hurting the AI Chip Maker

Nvidia shares fell early on Friday, continuing a slump that has driven the stock to its lowest levels in over two months. Three main factors appear to be contributing to the chip maker's decline.

1. General Market Selloff

Nvidia (NVDA) shares were down 4.3% to $104.50 in premarket trading after closing down 6.7% on Thursday. A significant factor seems to be a general retreat from highly valued technology stocks following the latest manufacturing activity data, which has heightened concerns about the U.S. economy and led to a broader stock market selloff. Futures for the Nasdaq 100 (NDX) index were down 1.7% early on Friday. Other chip makers like Advanced Micro Devices (AMD), down 1.5% in premarket trading, and Broadcom (AVGO), falling 1.9%, were also affected.

2. Antitrust Investigations

U.S. officials have reportedly reached out to several Nvidia competitors, including Advanced Micro Devices, to investigate complaints over potential antitrust activities. This development, reported by technology-focused news outlet The Information, is another factor likely impacting Nvidia's stock. An Nvidia spokesperson stated, “Nvidia wins on merit, as reflected in our benchmark results and value to customers. We’ll continue to support aspiring innovators in every industry and market and are happy to provide any information regulators need.” The U.S. government's scrutiny of the competitive environment for AI chips is not new, with similar reports emerging from the New York Times in June.

3. Amazon's In-House AI Chips

Amazon's recent earnings report revealed significant demand for its in-house AI chips, which could be another factor dragging on Nvidia's stock. Amazon CEO Andrew Jassy stated, “We have a deep partnership with Nvidia and the broadest selection of Nvidia instances available, but we have heard loud and clear from customers that they relish better price performance. It’s why we’ve invested in our own custom silicon in Trainium for training and Inferentia for inference.” This announcement suggests that Amazon's custom AI chips are gaining traction, posing potential competition to Nvidia's market dominance.

Despite these challenges, Nvidia maintains that its success is built on providing superior products rather than stifling competition. The company continues to face strong competition from a variety of players in the AI chip market, including large companies and start-ups alike.