Nvidia (NVDA) stock fell 10 percent on Tuesday from its all-time closing high. The chipmaker has had a bullish run from the past year after its chips were much in demand as they were used to train Microsoft-backed OpenAI’s ChatGPT and other models that followed. However, the chip maker was unable to meet the high demand for graphic processing units or GPUs last year. Rivals, including Intel, have succeeded in making better and newer chips, and companies are also changing their AI models and looking for higher efficiencies.
Nvidia stock rose like a rocket and saw a 200 percent gain in the past 12 months after the boom in tech companies developing their own AI tools. It reached over $950 per share, falling to $853.54 on Tuesday.
Investors might be cashing out on the stock, leading to a course correction, which can explain the 10 percent decline.
On Tuesday, Intel revealed a new chip called Gaudi 3. It is expected to power large language models. Intel said that its AI chip has double the efficiency of Nvidia’s H100 GPU, which is in the highest demand among US tech companies building generative AI tools. Intel also said that Gaudi 3 is faster than Nvidia’s GPU and runs AI models that are one and a half times faster.
Meta and Mistral have also planned to develop smaller AI models. This “shrinking” size will decrease the demand for Nvidia chips.
The exact reason for Nvidia’s stock decline may be one, more, or all of these factors, and CWEB can analyze them but cannot confirm the precise reason for the fall.
CWEB analysts believe that NVIDIA will still be a good stock in 2024 and most of 2025, but the stock will fall as other giants catch up and compete in the chipmaking market. Rivals have begun making more efficient AI chips for generative AI models. Some large tech companies are also shrinking the size of their AI models to use fewer chips. Companies are also looking for better chip efficiency, as several thousand of the current chips are required to build the crop of larger language models of generative AI tools.
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