AI chip monopoly shaken? Nvidia’s share price drops 14% in a month, market value evaporates by over $700 billion

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As the market is increasingly concerned that Nvidia’s absolute monopoly in the field of artificial intelligence (AI) computing chips is loosening, this sense of doubt has quickly spread to the stock market, causing the chip giant’s share price to plunge sharply over the past month.

On November 26, according to reports, influenced by a report showing that Google’s parent company Alphabet’s AI processors are gaining market share, Nvidia’s share price fell by 2.6% on Tuesday. Since the beginning of this month, the stock has dropped by 14% in total, with its market value evaporating by more than $700 billion. Investors’ panic mainly stems from concerns over an AI spending bubble, as well as doubts about Nvidia’s “circular investments” into startup companies such as OpenAI that are also its clients.

The ongoing plunge has led to a significant valuation correction for the company; its forward 12-month P/E ratio has dropped from about 34 times at the beginning of the month to 25 times, a level now below the Bloomberg "Tech Magnificent Seven" Index’s roughly 30 times P/E.

Adam Sarhan, CEO of 50 Park Investments, stated, if Nvidia begins to lose some market share, investors will reassess its growth prospects and reasonable valuation levels. Analysts point out that this is the core logic behind current market volatility.

Nevertheless, Wall Street analysts remain optimistic about the company’s outlook, with 74 out of 80 analysts giving a “buy” rating.

Valuation Restructuring and Growth Expectations

Despite the recent selloff, Nvidia’s stock is actually cheaper than the Bloomberg “Magnificent Seven Index,” whose average P/E stands at about 30 times, while Nvidia is the worst performer among its constituents this month.

However, in terms of basic data, Nvidia’s revenue and profit growth rates still far surpass other members of this group—including Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla.

According to Bloomberg data, Nvidia’s revenue this year is expected to grow by 63%, while Meta, which ranks second among the “Magnificent Seven,” is expected to grow by only 21%. Adam Sarhan believes:

Given its future growth potential, this growth level makes Nvidia’s current share price look “relatively undervalued.”

Peter Tuz, president and portfolio manager at Chase Investment Counsel, also says that although concerns about slowing growth have caused some investors to waver, Nvidia’s growth remains strong enough to support its positioning as a growth stock. In the firm’s portfolio, Nvidia is the second-largest holding after Alphabet.

Competitors Accelerate Their Pursuit

The competitive pressure Nvidia faces did not arise suddenly. Since OpenAI launched ChatGPT three years ago, its largest customers have been seeking alternatives to reduce their reliance on Nvidia’s top AI accelerators—which can cost over $30,000 per chip.

Tech giants have for years been developing their own chips with partners such as Broadcom. Nvidia’s closest competitor in the AI chip field, AMD, is expected to see its AI business revenue reach “tens of billions of dollars” annually by 2027.

Alphabet, Meta, Microsoft, and Amazon are expected to spend over $400 billion in AI-related capital expenditure over the next four quarters, most of which currently flows to Nvidia chips.

Responding to reports about Alphabet’s progress, a Nvidia spokesperson said that the company is pleased with Google’s advancement in AI and continues to supply to it, but emphasized:

“Nvidia is a generation ahead of the industry—it is the only platform that can run all AI models and operate in any computing environment. Compared with ASICs (Application-Specific Integrated Circuits) designed for specific AI frameworks or functions, Nvidia offers higher performance, versatility, and substitutability.”

Wall Street Is Not Overly Concerned

Despite fluctuations in market sentiment, the mainstream view on Wall Street does not seem to be overly worried about Nvidia’s development trajectory.

According to data compiled by Bloomberg, analysts have even raised their profit forecasts for the company’s next fiscal year by 12% compared to a week ago. Of the 80 analysts covering the company, 74 give a “buy” rating and only one gives a “sell” rating.

As the only bear, Jay Goldberg, an analyst at Seaport Global Securities, has raised his forecasts after Nvidia’s earnings report but still remains skeptical. Goldberg pointed out that although Nvidia’s numbers are good, supply constraints are beginning to ease.

Goldberg warns that once the market shifts from undersupply to oversupply, it marks the turning point of the cycle. He believes this change will not occur within three months, but expects it will happen in 2026.

Despite intensifying competition and cyclical concerns, there is currently little sign that competitors are eating into Nvidia’s sales.

According to a Wallstreetcn article, the latest earnings report shows Nvidia forecasts quarterly revenue of about $65 billion, about $3 billion higher than Wall Street’s expectations, with the vast majority still coming from AI chips. Previously, Nvidia CEO Jensen Huang predicted that total sales would exceed $500 billion over the next few quarters.

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