Nvidia Corp (NASDAQ: NVDA), a key player and market leader in the AI chip industry, faces growing competition as major tech companies like Amazon.Com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, Meta Platforms Inc (NASDAQ: META), and Microsoft Corp (NASDAQ: MSFT) develop their own AI chips.
These companies, relying heavily on Nvidia's specialized graphics processing units (GPUs) for AI development, are now investing in their technologies to reduce dependency and control costs.
Analysts claimed a $1 trillion opportunity in AI for Nvidia as Big Tech companies keep splurging to boost their position.
Nvidia's GPUs are central to building AI systems, including popular chatbots, and the company has not always been able to keep up with the high demand, the New York Times reports.
The U.S. semiconductor industry sanctions on China posed another dampener for stocks like Nvidia, which has significant exposure in the country.
The chip designer sold over $1 billion of modified chips to Chinese customers in 2023.
Reports indicate that the Chinese cloud companies, currently sourcing about 80% of high-end AI chips from Nvidia, may reduce this to 50%-60% within five years.
Despite efforts from other tech giants to create their own AI chips, Nvidia maintains a dominant position in the market, holding more than 70% of AI chip sales.
Its technology is crucial for generative AI, contributing to a 206% surge in sales and adding about a trillion dollars to its market value over the past year.
Nvidia's chips, priced at approximately $15,000 each, are among the fastest available, making them a preferred choice for many companies.
Analysts remain bullish over Nvidia's prospects as the key AI beneficiary versus rivals like Advanced Micro Devices, Inc. (NASDAQ: AMD).
Direxion Daily Semiconductor Bull 3x Shares (NASDAQ: SOXL) is a 3X leveraged fund encompassing a diverse range of stocks from the semiconductor industry. Nvidia, up close to 1% today, holds a 7.92% weight in the fund.
Price Action: NVDA shares traded higher by 0.84% at $615.43 on the last check Monday.