Nvidia Stock Drops. What Amazon’s New Chips Mean for the AI Leader.

Nvidia is the leading provider of artificial-intelligence chips. (Courtesy NVIDIA)

Nvidia stock was falling Wednesday, pushed down by the threat of competition from Amazon.com’s new AI hardware.

In midmorning trading, shares were down 0.3% at $180.93. Earlier gains reversed after the tech-focused website The Information reported that Microsoft was easing sales quotas for enterprise AI products.

Nvidia’s competition is Amazon’s new Trainium 3 AI chips, which the e-commerce company launched for customers on Tuesday.

Although Amazon said its chips can reduce the cost of training and operating AI models by up to 50% compared with systems that use equivalent graphics processing units, which are Nvidia’s specialty, the two companies still appear on relatively friendly terms. Amazon said it would use Nvidia’s NVLink Fusion technology—a platform allowing for a mix of custom chips and Nvidia hardware—in its AI computing infrastructure.

“With Nvidia NVLink Fusion coming to AWS [Amazon Web Services] Trainium4, we’re unifying our scale-up architecture with AWS’s custom silicon to build a new generation of accelerated platforms. Together, NVIDIA and AWS are creating the compute fabric for the AI industrial revolution,” Nvidia CEO Jensen Huang said in a statement.

Nvidia is looking to reassure investors that it will continue to have a dominant market share despite the threat of custom AI chips from the likes of Amazon and Google. Nvidia could benefit from its neutral market position, as some large technology companies are unlikely to be willing to become dependent on a rival company’s hardware.

Nvidia CFO Colette Kress said Tuesday that AI models being trained on Nvidia’s latest Blackwell hardware will be coming out in around six months’ time, and noted the company has $500 billion in bookings for its Blackwell and Rubin AI chips through 2026, even excluding a deal with ChatGPT-developer OpenAI that has yet to be completed.

Also on Tuesday, European AI start-up Mistral said it had trained its new generation of AI models on Nvidia hardware. The companies noted that the Mistral Large 3 model achieved 10 times better performance on Nvidia’s GB200 NV72 server racks than the prior-generation H200.

On Wall Street, two other chip stocks were mixed. Advanced Micro Devices was up 0.5% and Broadcom was off 1.7%.

Write to Adam Clark at adam.clark@barrons.com