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Nvidia stock is near bear market territory after falling 17% from its November record high.
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The selling has intensified since recent comments from Microsoft’s CEO suggested the chip craze was waning.
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Wedbush analyst Dan Ives views Nvidia’s decline as a temporary one, with strong future AI prospects.
Nvidia stock has entered correction territory and some key shifts in the artificial intelligence narrative could put pressure on the stock in late 2024.
The chipmaker’s stock is down 17% since its record high of $152.89 on Nov. 21. It is approaching a bear market, which Wall Street traders define as a 20% decline from the most recent high.
The darling AI’s stock price decline accelerated late last week following comments from Microsoft CEO Satya Nadella.
In an interview with Bill Gurley and Brad Gerstner of the B2 podcast, Nadella signaled that the frenzy in demand for AI chips may be waning.
Asked if Microsoft was still “supply constrained” in developing its AI technologies, Nadella responded: “I am the power. [constrained]yes, I am not limited in terms of chip supply.
He added: “We’ve definitely been constrained in 2024. What we’ve been saying to the Street is why we’re optimistic about the first half of ’25, which is the rest of our fiscal year. And then after that, I think we will be in better shape by 2026 and so we have good visibility.”
Since Nadella’s comments, Nvidia shares have fallen 7%. Microsoft is considered Nvidia’s largest customer, accounting for around 20% of its revenue.
Nadella’s comments suggest changing supply and demand dynamics for Nvidia’s AI chips, which have seen huge demand over the past two years as companies rush to create their own large models of language.
Demand was so huge for Nvidia’s GPUs that the company had to selectively choose which companies would receive priority for its chips, with stories of billionaire tech founders begging Nvidia CEO Jensen Huang to give it more chips during dinner.
Nadella’s comments that chip supply is no longer constrained does not necessarily mean demand is decreasing for Nvidia’s main set of products. This could just mean that supply is finally catching up for some of Nvidia’s major GPU products.
To be sure, recent comments from Wall Street analysts suggest that Nvidia’s next-generation Blackwell GPU chip is already facing at least a year’s delay for new orders.
However, Nadella’s comments muddle some of the more optimistic views on Wall Street, which likes to hear that demand is outstripping supply for a company’s products. One of Nvidia’s biggest customers saying that’s no longer the case might give pause to investors hoping for another year of mind-blowing growth for Nvidia.
