Nvidia’s stock is nearing bear market territory after a significant drop, following comments from Microsoft’s CEO, Satya Nadella, which hinted that the high demand for AI chips might be diminishing. The technology giant’s stock has fallen 17% from its record high of $152.89 in November. The decline in Nvidia shares accelerated last week after Nadella’s remarks in a podcast interview with Bill Gurley and Brad Gerstner.
During the interview, Nadella indicated that Microsoft is no longer “supply constrained” in its buildout of AI technologies. This contrasted with earlier constraints experienced in 2024. “We were definitely constrained in ’24.
What we have told the street is that’s why we are optimistic about the first half of ’25, and then after that, I think we’ll be in better shape going into 2026,” Nadella said. Since his comments, Nvidia shares have declined by 7%.
Nvidia’s stock faces demand shift
Microsoft is estimated to be Nvidia’s largest customer, accounting for about 20% of its revenue. Nadella’s statement suggests a change in the supply and demand dynamic for Nvidia’s AI chips, which have seen massive demand over the past two years. Despite Nadella’s comments, analysts like Dan Ives of Wedbush believe that the decline in Nvidia’s stock is temporary.
Ives suggests that supply may finally be catching up with some of Nvidia’s core GPU products and views the current dip as a buying opportunity for investors. Other industry leaders have also weighed in, potentially affecting Nvidia’s stock. Google CEO Sundar Pichai noted that progress in AI models might slow down in 2025 as the “low-hanging fruit is gone,” indicating the need for deeper breakthroughs.
OpenAI co-founder Ilya Sutskever also suggested that the development of AI could face challenges, having achieved “peak data.”
Additionally, strong earnings results from other tech companies, like Broadcom, which develops custom AI chips for firms like Amazon and Alphabet, might be contributing to a rotation out of Nvidia and into other stocks. “This is a digestion period for Nvidia that will be short-lived,” Ives stated. “We view Nvidia as a crucial AI name to own as CEO Jensen Huang leads this fourth industrial revolution into 2025.”
In conclusion, while Nvidia faces short-term pressures from changes in AI chip supply dynamics and competition, analysts remain optimistic about its long-term prospects in the AI technology sector.
Rashan is a seasoned technology journalist and visionary leader serving as the Editor-in-Chief of DevX.com, a leading online publication focused on software development, programming languages, and emerging technologies. With his deep expertise in the tech industry and her passion for empowering developers, Rashan has transformed DevX.com into a vibrant hub of knowledge and innovation. Reach out to Rashan at [email protected]
