Nvidia shares hit by report on new AI chip competition. How worried should investors be?
Competition for Nvidia’s crown in the artificial intelligence is ramping up, but analysts aren’t too worried — for now. Nvidia has been battered this month, losing more than 13%, as investors grow weary of elevated tech valuations. If that loss stands, it would mark the stock’s biggest monthly pullback since September 2022, when it plunged 20%. Shares fell another 4% on Tuesday after The Information reported, citing sources, that Meta Platforms was considering using Alphabet’s tensor processing units (TPUs) for its data centers. This comes as hyperscalers begin exploring alternatives to Nvidia’s graphics processing units (GPUs) . TPUs are application-specific chips, or ASICs, and often more power efficient compared to GPUs, which are general-purpose chips designed for a broader range of compute workloads. Analysts aren’t taking the news as an immediate hit to Nvidia, as the chipmaker is still the market leader with its GPUs. NVDA AVGO 1Y mountain Nvidia and Broadcom stock performances over the past year. Broadcom has jumped 13% this week, bringing its year-to-date gains to nearly 66%. That’s well above Nvidia’s 30% advance for 2025. “GPUs are clearly not going anywhere,” Bernstein analyst Stacy Rasgon wrote Tuesday. “Right now the overarching theme is of compute scarcity, and if anything this feels like an effort to secure more.” “To that end, we still think the question of ‘ASIC or GPU’ kind of misses the point. Right now the real question should really be ‘is the opportunity in front of us still big, or is it not?’ as (hopefully!) we are not yet in a mature, saturated market for AI hardware. In other words, it’s still the size of the pie that matters; if it’s big both GPU and ASIC should thrive (and if it’s not, they’re both in trouble),” he said. However, this competition could be boon for longtime ASICs supplier Broadcom , which helps design and manufacture Google’s TPUs. Mizuho highlighted Broadcom as the key beneficiary of Google’s potential TPU offerings to Meta. Analyst Vijay Ramesh reiterated the stock as a top pick, though he remains positive on Nvidia given strength in its Blackwell and Rubin pipeline. “We estimate META remains a large customer for NVDA but potentially bigger customer for AMD Instinct. A move to TPUs is +ve for AVGO, and could be a modest challenge for GPU suppliers,” Ramesh wrote in a Tuesday note. “We continue to see AVGO and NVDA as the 2 key players in the AI space.” Bank of America analyst Vivek Arya is also bullish on both Nvidia and Broadcom as well. The firm believes that TPUs are intensifying competition but that the AI data center market is still in early growth stages. He expects the total addressable market to grow about five times to more than $1.2 trillion by the 2030 compared to $242 billion by the end of this year. “NVDA is trading at ~25x market multiple, essentially valuing the company as another run of the mill franchise, which we disagree with,” Arya said in a Tuesday note. But “AVGO certainly has the upper-hand – we expect ~100%+ YoY AI sales growth in CY26 due to additional TPU and Anthropic projects – with the 38x CY26 PE (highest spread versus NVDA) reflecting the justified premium. Note if Google licenses more TPUs directly it might cut into AVGO’s direct TAM developing ASICs for other customers.”
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