Nvidia Stock Slips Again. What’s Hitting the Chip Maker.

Nvidia is the dominant provider of artificial-intelligence chips. (Dreamstime)

Key Points

• Nvidia shares fell 1.1% in premarket trading, adding to a 14% loss over the past month, mirroring a wider market slump.
• Google’s Tensor Processing Units offer a potentially better cost structure than Nvidia’s GPUs, but Nvidia’s software and general-purpose nature should help maintain the lead.
• UBS analysts estimate global AI capital expenditure will reach $423 billion this year and $571 billion in 2026, indicating market growth for multiple chip types.

Nvidia was falling early on Monday. A wider market slump was set to add to the chip maker’s recent woes.

Nvidia shares were down 1.1% at $175.05 in premarket trading. That’s set to add to a 14% loss over the past month.

The move looked to be broadly in line with the wider market, with futures tied to the S&P 500 losing 0.6%.

Among other chip makers, Advanced Micro Devices was down 1.1% and Broadcom was losing 0.8% in premarket trading.

Broadcom is the design partner for Google’s Tensor Processing Units, which are the focus of an increasingly fierce debate about whether they might take market share from Nvidia’s artificial-intelligence processors.

Under the right circumstances, Google’s TPUs can provide a much better cost structure than Nvidia graphics-processing units. However, Nvidia’s software and the general-purpose nature of its GPUs should help it maintain a leading position.

It’s not necessarily a zero-sum game between the two companies. So long as investment in AI hardware continues at its current rapid rate, there should be plenty of room for more than one type of chip. UBS analysts estimate global AI capital expenditure will come to $423 billion this year and $571 billion in 2026.

“With AI increasingly integrated into existing applications and workloads, we believe future productivity improvements and monetization opportunities will be sufficient to justify ongoing AI investments and related depreciation,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management, in a research note on Monday.

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