Nvidia shares slipped to $214.75 in premarket trading Thursday, as a chip selloff led by Broadcom weighed on one of the market's biggest AI trades. The decline brought Nvidia's market value near $5.24 trillion, as investors reassessed the sustainability of AI-driven growth amid broader sector jitters.
Broadcom plunged over 14% in premarket trade after its quarterly results missed lofty expectations for custom AI chips. The company's flat fiscal 2027 revenue target of $100 billion in AI revenue, which it did not raise, further disappointed investors. Reuters reported that Broadcom's drop could erase more than $315 billion in market capitalization if losses persist.
The selloff rippled through the semiconductor sector, with Nvidia bearing the brunt. Broadcom designs custom AI chips for major tech clients like Alphabet and Meta, offering a cheaper alternative to Nvidia's high-end GPUs. Investors view Broadcom's performance as a bellwether for AI chip demand, and its miss has cast doubt on whether Nvidia's rapid growth can keep pace with sky-high expectations.
Nvidia's fundamentals remain strong. For the fiscal first quarter, the company posted record revenue of $81.6 billion, an 85% increase year-over-year, with data center revenue hitting $75.2 billion. Nvidia also approved an additional $80 billion for share buybacks and raised its quarterly dividend from 1 cent to 25 cents per share.
CEO Jensen Huang sought to ease supply concerns at the Computex conference in Taipei, stating, “We have supply for very, very robust growth, but we’re still supply constrained.” This indicates that demand still exceeds Nvidia's production capacity, a dynamic that has historically supported pricing power.
Nvidia is expanding its presence in the personal computer market with the new RTX Spark chip, set for release this fall in PCs from major manufacturers. This move intensifies competition with AMD and Intel in the PC processor space, as Nvidia aims to bring AI capabilities to desktops and laptops.
Huang's visit to South Korea highlighted Nvidia's reliance on Samsung Electronics and SK Hynix, which supply about 70% of the memory used in Nvidia's AI chips. KB Securities analyst Jeff Kim noted, “Nvidia’s dependence on South Korean suppliers is rising,” underscoring supply chain risks.
The broader market felt the impact, with S&P 500 and Nasdaq 100 futures slipping as traders reacted to Broadcom's results. Dan Coatsworth, head of markets at AJ Bell, commented, “Broadcom is finding that meeting and even slightly beating forecasts is not enough.” This sentiment has now turned to Nvidia, where expectations remain extremely high.
Regulatory risks also loom. The U.S. Commerce Department recently closed a loophole for advanced AI chips shipped to Chinese companies outside China, though a Nvidia spokesperson said the guidance does not affect Nvidia due to existing rules. However, tighter export controls continue to overhang the sector.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, described Broadcom's drop as “a classic case of very high expectations meeting a market that wanted perfection.” That is the challenge now facing Nvidia: the stock still trades as the heart of the AI rollout, but Thursday's action shows investors are questioning how much perfection is already priced into chip names.
