Nvidia stock’s correction has accelerated since Microsoft’s CEO hinted the frenzied demand for AI chips may be waning
Nvidia stock is approaching bear market territory after falling 17% from its record high in November.
The selling has intensified since recent comments from Microsoft’s CEO suggested the chip craze is waning.
Wedbush analyst Dan Ives sees Nvidia’s decline as temporary, with strong future prospects for artificial intelligence.
Nvidia The stock has entered correction territory and some major shifts in the AI narrative may weigh on the stock as 2024 comes to a close.
The chipmaker’s stock has fallen 17% since hitting a record high of $152.89 on November 21. It is approaching a bear market, which Wall Street traders define as a 20% decline from the recent peak.
AI Darling’s share price decline accelerated late last week following comments from Microsoft CEO Satya Nadella.
In an interview with Bill Gurley and Brad Gerstner of the B2 podcast, Nadella noted that the frenzy of demand for AI chips may be abating.
When asked if Microsoft was still “supply constrained” in building AI technologies, Nadella replied: “I’m strong.” [constrained]Yes, I am not limited by chip supplies.”
He added: “We were definitely constrained in ’24. What we said to the Street is that this is why we are optimistic about the first half of ’25, which is the rest of our fiscal year. And then I think we will be.” “In better shape before 2026 so we have good visibility.”
Since Nadella’s comments, Nvidia shares have fallen 7%. Microsoft is believed to be Nvidia’s largest customer, accounting for an estimated 20% of its revenue.
Nadella’s comments signal a shift in the supply-and-demand dynamic for Nvidia’s AI chips, which have seen huge demand over the past two years as companies race to build large language models of their own.
Demand has been so huge for Nvidia’s GPUs that the company has had to selectively choose which companies will get priority in its chips, with stories of billionaire tech founders Nvidia CEO Jensen Huang begging for more chips at dinner.
Nadella’s comments that it is no longer supply-constrained for chips does not necessarily mean demand is waning for Nvidia’s core product portfolio. It could simply mean that supply is finally starting to catch up with some of Nvidia’s core GPU products.
To make sure, Latest analyst comment From Wall Street suggested that Nvidia’s next-generation Blackwell GPU chip is already facing off At least a one-year backlog of new orders.
However, Nadella’s comments cloud some of the more optimistic views on Wall Street, which likes to hear that demand is outstripping supply for the company’s products. Having one of Nvidia’s biggest customers say that’s no longer the case could give pause to investors hoping for another year of stunning growth for Nvidia.
