Nvidia’s Stock Dips 11% from Peak: AI Advancements Pose Further Challenges for Investors

Nvidia’s Stock Dips 11% from Peak: AI Advancements Pose Further Challenges for Investors

Nvidia (NASDAQ:NVDA) hit record highs last month, with shares of the chipmaker surging to $974 on March 8. But investors haven’t had much to celebrate since then, as this hot stock has since cooled.

Specifically, Nvidia stock is now trading just over 11% below that record high. Wall Street fears that the stock market bubble will burst, and its artificial intelligence AI-fueled growth could falter due to intensifying competition in the AI ​​chip market. It was therefore not surprising to see Nvidia shares fall another 2% on April 9 after IntelIt is (NASDAQ:INTC) launch of a new AI chip, which was directly aimed at Nvidia’s top performance.

Let’s see if Nvidia investors have reason to worry following Intel’s latest move to target the fast-growing AI chip market.

Intel aims for Nvidia’s AI supremacy

Intel has been working to gain a foothold in the AI ​​chip market, but the company’s efforts haven’t gone far. End of 2023, Intel’s potential revenue pipeline from AI chips was “well over $2 billion and growing,” according to CEO Pat Gelsinger. That pales in comparison to Nvidia’s fiscal 2024 data center revenue of $47.5 billion, indicating it’s currently well ahead of Intel in the AI ​​chip market.

However, Chipzilla is once again attempting to take on Nvidia’s dominance in AI with its latest Gaudi 3 accelerator. The press release announcing the launch highlights that this new Intel chip “delivers on average 50% better inference and 40% more power efficiency on average than the Nvidia H100, at a fraction of the cost.”

The press release adds that Gaudi 3 can reduce the time required to train the Llama2 extended language model (LLM) with 7 billion and 13 billion parameters – as well as the 175 billion parameter GPT-3 model – by approximately 50%. Intel added that several companies are close to deploying Gaudi’s accelerators and server makers, and Dell Technologies, Super microcomputer, LenovoAnd Hewlett Packard Company should also offer systems based on this new chip.

Additionally, Intel claims that Gaudi 3 could match the performance of Nvidia’s upcoming H200 AI graphics processing unit (GPU). Since Intel’s latest AI chip is based on Semiconductor manufacturing in TaiwanThanks to the 5 nanometer (nm) manufacturing process, this isn’t a surprising claim. Indeed, Nvidia’s current flagship, the H100, is manufactured using a custom 5nm process from TSMC.

Additionally, Nvidia’s upcoming H200 processor will also be based on TSMC’s N5 process, which refers to its 5nm process node. Investors might therefore believe that Intel might actually be able to chip away at Nvidia’s dominance in the AI ​​chip market through a mix of aggressive pricing and strong performance.

But investors should note that Nvidia’s H100 GPU was unveiled a few years ago and entered mass production later in 2022. Intel’s Gaudi 3 chip is expected to enter mass production in the third and fourth quarters of 2024. But by the time Intel begins shipping these chips, Nvidia would have upped its game.

Dislodging Nvidia is easier said than done

Nvidia announced the Blackwell GPU architecture last month, saying this new platform will allow “organizations around the world to build and run real-time generative AI on multi-billion parameter language models at a single cost and energy consumption up to 25 times lower than its predecessor.

Additionally, the Blackwell B200 GPU is expected to be four times faster than the H100 during AI training and 30 times faster during inference. This massive increase in performance of the B200 over the previous generation of Nvidia GPUs can be attributed to the advanced 4nm process node the chip is built on.

Better yet, Nvidia is reportedly about to aggressively price Blackwell processors. And given the performance and efficiency gains Nvidia promises, it might be able to mitigate any cost advantage Intel promises. All this explains why major cloud computing providers such as Amazon, Alphabetit’s Google, Meta Platforms, MicrosoftAnd Oracle should deploy the B200.

Nvidia says chips based on the Blackwell architecture will be available later this year, indicating that the company could steal the spotlight from Intel and maintain its dominance in the AI ​​chip market. Unsurprisingly, Nvidia’s data center revenue is expected to double in 2024 to $95 billion, according to analyst estimates.

This suggests that the market expects Nvidia to remain the leading player in the AI ​​chip market, where it would control a share of over 80%. So investors would do well to look beyond Intel’s AI chip announcement, as the new Gaudi 3 processor may not pose much of a challenge to Nvidia given that the latter is about to pass to a new generation of more powerful and more efficient chips.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Hard Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short 405 calls $ in January 2026 on Microsoft and short $47 calls in May 2024. Intel. The Mad Motley has a disclosure policy.

Nvidia stock is down 11% from its record highs: will this development in artificial intelligence (AI) bring more bad news to investors? was originally published by The Motley Fool

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