Nvidia Stock Drops. Why OpenAI’s New Deal Is Bad News for the Chip Leader.

Nvidia CEO Jensen Huang. (I-HWA CHENG/AFP via Getty Images)

Nvidia stock was tumbling on Monday after competitor Advanced Micro Devices announced a multibillion-dollar deal with OpenAI that could challenge the Magnificent Seven company’s AI chip dominance.

Nvidia shares dropped 2.2% to $183.53 ahead of the opening bell. Futures tracking the S&P 500 were 0.3% higher.

The stock had been rising in earlier trading after record third-quarter sales from the company’s biggest server maker Foxconn signaled that AI demand remains strong.

Created with Highcharts 9.0.1Source: FactSet

Created with Highcharts 9.0.1NvidiaHon Hai Precision Industry2025Oct.-50-40-30-20-1001020304050%

Taiwan’s Foxconn, officially called Hon Hai Precision Industry, said in a statement that its third-quarter revenue had jumped 11% from a year ago, to a record 2.06 trillion New Taiwan dollars ($67.4 billion). Analysts polled by FactSet were expecting NT$2.10 trillion.

Foxconn touted “significant growth” in AI server shipments in September, when revenue surged 14% from a year ago to a record NT$837.07 billion. That’s a good sign for Nvidia, which has seen demand for its chips surge ever since the launch of ChatGPT in late 2022 set off an AI investing boom.

But shares reversed course after OpenAI and AMD announced a massive computing dea l that saw OpenAI committed to purchasing 6 gigawatts worth of AMD’s chips. AMD stock soared 24% on the news.

It’s a sign that Nvidia’s position as Big Tech’s go-to chip supplier could be under threat. Google and Amazon have started making their own chips in recent years, and OpenAI also recently signed a $10 billion deal with Broadcom.

Write to George Glover at george.glover@dowjones.com