Nvidia Corp. shares fell on Friday, with the chipmaker at risk of losing its historic $4 trillion valuation for the first time in nearly two months.
The drop came as Broadcom Inc. is helping OpenAI design and produce an artificial intelligence accelerator chip, with the two firms reportedly planning to ship the first chips in that lineup starting next year. This would make Broadcom a more direct competitor to Nvidia, the leader in AI hardware.
Nvidia’s stock fell 3.5 per cent to $165.58, resulting in a market capitalisation of just over $4 trillion. Broadcom shares jumped as much as 16 per cent, hitting an intraday record high in a move that added nearly $150 billion to its market capitalisation, bringing it to roughly $1.6 trillion.
While investors should prepare for Nvidia having more competition in the area, the company can lose market share but still have consistent growth because of how quickly the AI market is growing, said Jim Awad, senior managing director at Clearstead Advisors.
“I view this as a knee-jerk reaction, not a reason to sell,” he said. “We will need to watch how Broadcom and OpenAI execute going forward, but no one is going to take away Nvidia’s business in an instant.”
With the decline, Nvidia has dropped about 10 per cent off an August peak, representing almost $470 billion of erased market value. The company recently fell under its 50-day moving average, although it still stands as the largest company in the world. Microsoft Corp. is in second place, with a market capitalisation of $3.7 trillion.
Daniel O’Regan, managing director of equity trading at Mizuho Securities, sees it as notable that Nvidia hit an 18-month relative low compared with Broadcom.
“The word OpenAI sparks a tonne of momentum, and this is an acceleration of a trend where people are really warming up to Broadcom,” he said, noting that Broadcom shares have outperformed Nvidia this year.
“The bifurcation between the two today seems a little extreme, but Nvidia has been the poster child for AI for about three years, and while I don’t think people are cooling on it, they are broadening out to other AI winners,” he said. “Broadcom is a shiny new thing, relatively.”
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