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Nvidia stock is close to bear market territory after a 17% drop from its record high in November.
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The sell-off has intensified since recent comments from Microsoft’s CEO suggested the chip craze is easing.
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Wedbush analyst Dan Ives sees Nvidia’s decline as a temporary dip, with strong future AI prospects.
Nvidia stock has entered correction territory and some key shifts in the artificial intelligence narrative may be pressuring shares as 2024 winds down.
The chipmaker’s stock has declined 17% since its record high of $152.89 on November 21. It is edging closer to a bear market, which Wall Street traders define as a 20% drop from the most recent peak.
The AI darling’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 AI chip demand frenzy may be waning.
When asked if Microsoft was still “supply constrained” in its buildout of AI technologies, Nadella responded, “I am power [constrained], yes, I’m not chip supply constrained.”
He added: “We were definitely constrained in ’24. What we have told the street is that’s why we are optimistic about the first half of ’25 which is the rest of our fiscal year. And then after that I think we’ll be in better shape going into 2026 and so we have good line of sight.”
Since Nadella’s comments, Nvidia shares have declined 7%. Microsoft is thought to be Nvidia’s largest customer, representing an estimated 20% of its revenue.
The comments from Nadella suggest a shifting supply and demand dynamic for Nvidia’s AI chips, which have seen enormous demand over the past two years as companies race to build out their own large language models.
The demand was so enormous for Nvidia’s GPUs that the company had to selectively pick which companies would receive priority for its chips, with stories of billionaire tech founders begging Nvidia CEO Jensen Huang for more chips over dinner.
Nadella’s comments that it is no longer supply-constrained for chips doesn’t necessarily mean that demand is waning for Nvidia’s main product set. It could simply mean supply is finally catching up for some of Nvidia’s core GPU products.
To be sure, recent analyst commentary from Wall Street has suggested that Nvidia’s next-generation Blackwell GPU chip already faces at least a one-year backlog for new orders.
However, Nadella’s comments muddy some of the most bullish views on Wall Street, which loves to hear demand is outstripping supply for a company’s products. One of Nvidia’s largest customers saying that’s no longer the case could give pause to investors hoping for another year of eye-popping growth for Nvidia.
