Investors sent Nvidia shares down 4.6% on Thursday, closing at $199.57, as the market reacted to news that major cloud customers Alphabet and Amazon are aggressively expanding their own artificial intelligence chip businesses. The selloff highlights a growing concern that Nvidia's dominance in the AI chip market could face serious challenges as its biggest clients become competitors.
Key Earnings Reveal Shift in AI Landscape
Alphabet reported a 63% surge in Google Cloud revenue for the first quarter, outpacing Microsoft Azure's 40% growth and Amazon Web Services' 28% increase. The company also disclosed that it has begun selling its Tensor Processing Units (TPUs) directly to select customers. These custom AI chips compete directly with Nvidia's GPUs, which have been the gold standard for training and running AI models.
Amazon's CEO Andy Jassy revealed that the company's chip division is now generating over $20 billion in annual revenue. Commitments for Amazon's Trainium AI chip have exceeded $225 billion, and the company has acquired more than 2.1 million AI chips over the past year—over half of which were Trainium. Despite this, Amazon still plans to deploy over one million Nvidia GPUs starting in 2026.
Market Divergence: AMD and Broadcom Gain
While Nvidia fell, shares of Advanced Micro Devices (AMD) rose 5.1% and Broadcom gained 3.0%. The divergence reflects investor optimism that the push for custom chips could benefit other semiconductor players. Broadcom, in particular, is seen as a key partner for companies developing custom AI silicon.
Meta Platforms also raised its 2026 capital expenditure outlook to between $125 billion and $145 billion, up from an earlier $115 billion to $135 billion, citing higher component costs and rising data-center expenses. CEO Mark Zuckerberg cited “strong momentum” across Meta's app family and the debut of the first model from Meta Superintelligence Labs. First-quarter revenue hit $56.31 billion, a 33% increase.
AI Spending Surges, But Questions Mount
The four major U.S. tech firms that reported earnings Wednesday all indicated AI investments are not letting up, pushing their combined forecasted spend above $700 billion this year—up from a prior $600 billion estimate. Microsoft CFO Amy Hood said demand for Azure's AI offerings “continues to exceed supply” and keeps broadening.
However, the debate has shifted from whether companies are spending on AI to who is actually seeing the payoff. “The risk of sitting it out is bigger than the risk of leaning in,” said Daniel Newman, CEO of Futurum Group. Still, that leaves a key question on the table: who reaps the rewards first—the chipmakers, the cloud providers, or the software players building with these models?
Nvidia's Pricing Power Under Scrutiny
Scarcity continues to play in Nvidia's favor. The company's B300 servers are reportedly fetching about $1 million in China, almost twice the U.S. price, as demand surges and American export restrictions bite. However, Nvidia said the B300 is not allowed for sale in China, adding that “unlawful diversion is a recipe for failure.”
The worry is that scarcity and big budgets don't guarantee fat margins forever. Should Alphabet's TPUs, Amazon's Trainium, or silicon built through Broadcom-backed projects start capturing a bigger slice of AI workloads, Nvidia might keep moving product but see pricing power erode at the margins. If AI investments take longer to pay off—or export restrictions tighten further—the bullish case for the stock gets tougher to justify.
Outlook: A Crowded Arena
Nvidia's market cap remains near $4.9 trillion, but Thursday's slide made it clear: those massive AI budgets are a double-edged sword, especially when your customers start turning into rivals. The AI trade is no longer a one-horse race, and investors are recalibrating their expectations.
