Nvidia Corp., recognized as the world’s most valuable company, is currently experiencing a turbulent phase in the stock market as 2026 begins. Shares of the chipmaker have fallen by 9.1% since reaching an all-time high on October 29, significantly lagging behind the broader S&P 500 Index. Investors are increasingly anxious about the durability of spending in artificial intelligence and Nvidia’s dominance in the chip market.
The recent decline is particularly striking given Nvidia’s stock rose over 1,300% since the end of 2022, pushing its market capitalization to above $5 trillion at its peak, a stark contrast to the approximately $400 billion valuation just three years prior. However, the stock has since shed $460 billion in market value over a few months, bringing its three-year gain to nearly 1,200%.
Nvidia, the reigning AI chip manufacturer, is now contending with intensified competition from companies like Advanced Micro Devices Inc. (AMD) and its own major clients, including Alphabet Inc. and Amazon.com Inc. Concerns are mounting within Wall Street regarding Nvidia’s investments in its clients, which may be perceived as artificially supporting demand for its products.
“The risks have clearly risen,” said JoAnne Feeney, partner and portfolio manager at Advisors Capital Management. The potential repercussions of a downturn for Nvidia could reverberate through the equity markets as well. Since the market rally began in October 2022, Nvidia has accounted for approximately 16% of the S&P 500’s gains, with Apple Inc. following at about 7%.
Despite these challenges, Nvidia’s stock continues to attract demand, trading at a lower valuation compared to many of its Big Tech counterparts, even as earnings expectations remain high. Analysts predict Nvidia will see a 57% growth in profits and a 53% increase in sales in its upcoming fiscal year, which ends in January 2027. In comparison, Apple is projected to see only around 10% growth in both metrics.
Most analysts remain optimistic, with 76 out of 82 covering Nvidia issuing buy ratings and just one recommending a sell. The average price target among Wall Street analysts suggests a potential 37% increase over the next 12 months, which would elevate Nvidia’s market value beyond $6 trillion.
Nvidia’s CEO Jensen Huang emphasized the soaring demand for Nvidia’s GPUs, attributing it to the exponentially increasing complexity of AI models. Looking ahead, the release of Nvidia’s next-generation chips, termed “Rubin,” is anticipated to further strengthen its position in the market.
However, competition is intensifying. While Nvidia commands over 90% market share in AI accelerators, rivals like AMD are gaining traction, securing significant data center orders. Furthermore, major clients like Alphabet, Amazon, Meta Platforms Inc., and Microsoft are increasingly investing in their own chip-making capabilities to bypass the costs associated with Nvidia’s products, which can exceed $30,000 each.
The adoption of custom chips is benefitting companies like Broadcom Inc., which produces semiconductors for these AI giants, and has seen substantial growth in its application-specific integrated circuit (ASIC) sector. Nvidia’s recent decision to license technology and hire talent from startup Groq indicates a response to the demand for more specialized and cost-effective chips.
Despite the rise of competitors, the overall demand for AI computing power remains substantial, suggesting that Nvidia’s position may hold firm in the near future. Analysts from Bloomberg Intelligence project that the market may be underestimating Nvidia’s long-term prospects, even as concerns over profit margins linger.
Nvidia’s gross margin, an essential profitability measure, has been declining since fiscal 2026 due to the costs associated with its latest Blackwell chip series. This decline is expected to stabilize in the following fiscal year, but any significant drop in margins could trigger alarm bells among investors.
Investors are also drawn to Nvidia’s relative market valuation, which remains lower than many leading tech stocks, apart from Meta. Some believe Nvidia is being undervalued, as market sentiment appears to assume a stagnation in AI deployment.
The dynamics in the tech sector are changing, with competitors making bold moves and the landscape becoming increasingly complex, but Nvidia’s legacy and performance continue to promise substantial opportunities for growth.
