Nvidia Stock Rebounds. Why Google’s AI Chips Shouldn’t Worry Investors.

Nvidia CEO Jensen Huang. (JADE GAO/AFP via Getty Images)

Key Points

• Nvidia shares rose 2.2% after a 2.6% drop, as investors reconsidered the threat posed by Google’s chip business.
• Meta Platforms is reportedly in talks to use Google’s tensor processing units, potentially impacting Nvidia’s market share.
• Analysts from Mizuho and Citi downplayed the threat, maintaining positive ratings and price targets for Nvidia stock.

Nvidia stock was rebounding Wednesday, as investors got over fears that the artificial-intelligence chip maker’s dominant market share may come under threat from Google parent Alphabet .

Nvidia shares climbed 2.2% to $181.57 ahead of the opening bell, having dropped 2.6% on Tuesday after reports signaled the strength of Google’s chips business.

Meta Platforms is in talks to use Google’s tensor processing units, or TPUs, in a deal that could be worth billions of dollars, The Wall Street Journal reported on Tuesday, citing people familiar with the matter. That fueled worries about the future market share of Nvidia graphics processing units, which up to now have been the dominant chip used to power large-language models such as ChatGPT and Google’s own Gemini.

“Google Cloud is experiencing accelerating demand for both our custom TPUs and Nvidia GPUs; we are committed to supporting both, as we have for years,” a Google spokesperson told Barron’s. Meta didn’t respond to a request for comment.

Nvidia put out a slightly bizarre—and totally unnecessary—statement on Tuesday, saying it was “delighted by Google’s success” but asserting that the company is still “a generation ahead of the industry” and “the only platform that runs every AI model and does it everywhere computing is done.”

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It’s a sign the chip maker’s execs may feel rattled following a recent selloff in shares. Nvidia stock is down 11% over the past month amid concerns about long-term demand for GPUs and bloated AI valuations.

Analysts have played down the threat that Google’s TPUs pose to Nvidia.

Mizuho’s Vijay Rakesh noted that investors have been questioning how long major customer OpenAI’s ChatGPT can maintain its lead among large-language models. But added that he still sees Nvidia having a “well diversified AI GPU pipeline,” noting a partnership announced last week with Saudi Arabia state-backed Humain. Rakesh rates Nvidia Outperform, with a $240 price target that implies the stock can jump 35% from its level as of Tuesday’s close.

Citi analyst Atif Malik noted that both Meta and Microsoft are likely still reliant on Nvidia chips as they dip into their pockets to ramp up their AI efforts. Malik rates the stock Buy, with a price target of $270.

Alphabet shares have jumped 21% over the past month, lifting the tech giant’s total valuation to $3.904 trillion—about $400 billion short of Nvidia, at $4.321 trillion.

Apple sits between the two as the second-largest U.S. company by total market capitalization. Its valuation stood at $4.093 trillion as of Tuesday’s close, with investors seeing the iPhone maker as a haven because it is less exposed to AI demand than its Magnificent Seven rivals.

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