Major tech companies are ramping up their AI capital expenditures, which should have been a significant positive for Nvidia. Yet, the market has delivered the opposite reaction. On Thursday (April 30, local time), Nvidia (NVDA) shares fell more than 4%, dropping below the $200 mark. The previous evening, Meta (META), Alphabet (GOOG), Microsoft (MSFT), and Amazon (AMZN) successively released their earnings reports. Combined, the four hyperscale cloud providers expect to invest up to $725 billion in AI infrastructure construction in 2026. Nvidia holds approximately 90% of the AI accelerator chip market, so conventional wisdom suggests it would directly benefit from this wave of investment. However, investors are concerned that as Nvidia’s most important customers begin mass-producing their own chips, its market dominance will face challenges.
Alphabet announced it will sell its self-developed TPU chips to select external customers, who can deploy them within their own data centers. Previously, TPUs served almost exclusively Google’s internal ecosystem. Once commercialized externally, they evolve from a potential competitor to Nvidia’s GPUs into a substantive market rival. Although TPUs are generally considered less versatile than Nvidia’s solutions, they offer notable cost-effectiveness advantages for specific AI application scenarios. Meanwhile, Amazon emphasized the rapid growth of its self-developed chip business during its earnings conference call. According to Bloomberg, Amazon’s CEO stated that the company’s chip business has surpassed $20 billion in annualized revenue, achieving triple-digit year-over-year growth, with the core product being its self-developed Trainium chip.
Regarding this competitive dynamic, some Wall Street analysts have issued clear warnings. Jay Goldberg, a semiconductor analyst at Seaport Research, stated bluntly that this could fundamentally disrupt Nvidia, posing a fairly significant risk. The logic is that hyperscale cloud providers are not only Nvidia’s largest customers but are also investing resources to become its competitors. However, not all analysts share this pessimistic view. Stacy Rasgon of Bernstein Research argues that focusing on who wins or loses is the wrong question. The rise of AI agents is driving explosive growth in computing demand, and the key factor constraining the industry today is supply, not demand. In this context, all chip manufacturers with credible production capacity, including Nvidia, can achieve full sales. Nvidia currently holds $95.2 billion in supply commitments, with partner customers covering leading institutions such as OpenAI, Anthropic, CoreWeave, and Meta.
Nvidia’s stock price surged to an all-time high on April 27, accumulating a year-to-date gain of about 12%, outperforming the Nasdaq Composite Index, and its market capitalization has returned to above $5 trillion. Management recently released a new AI model aimed at improving the accuracy of quantum computers and continues to expand in the physical AI space. Although the latter currently accounts for less than 3% of revenue, its role may become more significant with the development of autonomous driving and robotics technology. For long-term investors who believe that AI spending is not a short-lived boom and that Nvidia can monetize AI beyond the data center, its forward P/E ratio of about 25x is seen as a good buying opportunity.
