While Nvidia (NVDA) stock is still outperforming the S&P 500 Index ($SPX) this year, it has lost over 17% from its recent highs. NVDA has been the flagbearer of the artificial intelligence (AI) trade and delivered stellar returns in 2023 and 2024, which helped it become the first-ever company to command a $5 trillion market cap.
However, we have seen a realignment of sorts among AI stocks over the last three months. For instance, Apple (AAPL) and Alphabet (GOOG) (GOOGL), which were perceived to be AI laggards, have rebounded from their lows, and the Google parent is now the best-performing “Magnificent Seven” stock this year. On the other hand, Meta Platforms (META) and Nvidia, which outperformed spectacularly over the last two years, have been quite grounded of late.
Nvidia’s financial performance has been quite impressive, though, and in its fiscal Q3 2026, the Jensen Huang-led company reported revenues of $57 billion, which were up 62% year-over-year (YoY). The quarter-over-quarter (QoQ) increase in Nvidia’s revenue was $10 billion, which, for context, is higher than the total quarterly revenues it used to post before AI really took off. The strong topline growth is flowing to Nvidia’s bottom line, and EPS rose 67% to $1.30 in fiscal Q3. What makes the growth all the more astonishing is that the company achieved this despite being virtually locked out of China, the world’s second-largest market for AI chips.
Nvidia’s growth story is far from over, and management expects fiscal Q4 revenues to be $65 billion at the midpoint, which represents a YoY rise of around 65%.
The decline in Nvidia shares might seem odd considering the stellar financial performance that the company has been reporting. Here’s what’s been driving down NVDA.
-
AI Bubble Concerns: The AI bubble chatter has grown louder, pulling down AI names, including Nvidia.
-
Concerns Over Hyperscaler Spending: There are intermittent concerns over hyperscalers slowing down their AI capex, which would mean that they would need fewer Nvidia chips.
-
Rising Competition: The competition in the AI chip market has risen as chipmakers as well as tech companies want a piece of the lucrative market. Chip companies like Advanced Micro Devices (AMD) and Broadcom (AVGO) have upped their game and signed up OpenAI as a customer. At the same time, Anthropic announced plans to buy as many as 1 million of Alphabet’s Tensor Processing Units (TPUs), and reports suggest that Meta Platforms is also in talks to buy chips worth billions of dollars from the company. Companies like Amazon (AMZN) are also building custom chips, which would help them lower their reliance on Nvidia.
-
Nvidia Might Have Lost Out on China Business: While the Trump administration has granted a go-ahead to Nvidia to sell its H200 chips to “approved customers” in China, albeit with the controversial 25% cut in revenues, Chinese companies don’t seem to be lining up for NVDA’s silicon. China has doubled down on domestic chips, and Nvidia might have lost out on the Chinese market, which CEO Jensen Huang believes is a $50 billion opportunity for the company this year.
