Is the shine coming off Nvidia stock?

Is the shine coming off Nvidia stock?

  • 22.03.2025 14:15
  • fool.co.uk
  • Keywords: AI, Market Growth

Nvidia's new AI chip launch didn't boost its stock as expected, raising questions about its growth momentum. Drawing parallels with IBM's past mistakes, the article warns against over-reliance on hardware advancements in the face of emerging AI competition and commoditization. Investors remain cautious as alternatives like DeepSeek challenge Nvidia's dominance.

Nvidia ServicesNVDAsentiment_dissatisfiedAAPLsentiment_satisfiedMSFTsentiment_satisfiedMETAsentiment_neutral
open_in_newOriginal article

Estimated market influence

Nvidia

Nvidia

Negativesentiment_dissatisfied
Analyst rating: Strong buy

The stock price didn't surge after the new chip launch, indicating potential issues.

Apple

Apple

Positivesentiment_satisfied
Analyst rating: Buy

Mentioned as a comparison to Nvidia's past success with product launches.

IBM

Negativesentiment_dissatisfied
Analyst rating: N/A

Failed to adapt to new technology, leading to financial collapse and near-bankruptcy.

DeepSeek

Negativesentiment_dissatisfied
Analyst rating: N/A

Changed the narrative around AI by commoditizing OpenAI's models, affecting Nvidia's position.

OpenAI

Neutralsentiment_neutral
Analyst rating: N/A

Its models were commoditized by DeepSeek, impacting their market position.

Microsoft

Microsoft

Positivesentiment_satisfied
Analyst rating: Strong buy

Invested heavily in AI infrastructure with significant capital expenditure.

Meta

Meta

Neutralsentiment_neutral
Analyst rating: Strong buy

Committed substantial funds to AI, but no direct impact on Nvidia's stock discussed.

Context

Analysis of Nvidia Stock Performance and Market Implications

Super Bowl of AI

  • Nvidia's New Chip: Jensen Huang introduced the Rubin chip, which is up to 14 times more powerful than the previous Blackwell model.
  • AI Growth Projection: Huang predicts a need for 100 times more computing power than anticipated just a year ago.

Echoes of the Past (IBM Analogy)

  • Historical Context: IBM's failure to recognize the PC threat led to near bankruptcy, highlighting the risks of over-investing in dominant technologies.
  • Investment Caution: The author advises investors to learn from IBM's mistake and remain cautious about Nvidia's trajectory.

Future of AI

  • Commoditization of AI Models: DeepSeek has commoditized OpenAI's models, including GPT-1, suggesting that powerful chips aren't the sole determinant of effective LLMs.
  • Hyperscaler Investments:
    • Microsoft plans to spend $90bn in 2025 on infrastructure.
    • Meta has committed $65bn for the year.

Competitive Landscape

  • Market Shift: The AI industry's focus on increasing computational power may lead to a saturated market, similar to IBM's experience with mainframes.
  • Strategic Considerations: Heavy investments by hyperscalers could lead to margin collapse if the market shifts, as seen in IBM's case.

Long-Term Effects and Risks

  • Potential Market Overheating: The author warns of a "delusional epoch" where excessive investment in AI may backfire, potentially leading to significant financial losses for tech giants.
  • Investment Advice: Until a clearer path emerges for AI's future, the author advises against investing in Nvidia.

Conclusion

The article underscores the risks and uncertainties surrounding Nvidia's dominance in the AI chip market, drawing parallels from IBM's past mistakes. It highlights the importance of strategic caution in an evolving technological landscape.