Nvidia falls 12.8% as rivals surge on market rotation
Nvidia shares dropped 12.8% amid reports of customer financing, while AMD and Broadcom surged over 18%. Analysts remain bullish on Nvidia’s long-term valuation despite short-term volatility.
The S&P 500 rose 2.5%, the DAX 3.6%, and the Nasdaq 100 3.5% for the week, despite hot US inflation data and rising US bond yields to 5.1%. The semiconductor index (SOX) gained 8.1%, with AMD up 18.9% and Broadcom up 18.2%, while Nvidia fell 12.8%. Nvidia’s decline was attributed to a Wall Street Journal report alleging the company financed customers to secure chip orders, a practice described as a 'bribe.' Nvidia is expected to report earnings on Tuesday with 91% revenue growth anticipated. Bitcoin fell 10% for the week, and gold dropped 4.5% to below $4,000. Anthropic’s IPO is mentioned as a positive development, with pre-market prices between $1.7 and $1.8 trillion against a $1.5 trillion valuation, and the offering reportedly oversubscribed six times.
Walter Goodwin predicted that NVIDIA will become a $10 trillion business within five years, citing the sustained nature of the AI buildout and the company's supply chain advantages. He noted that NVIDIA currently trades at a lower forward multiple than Cisco did after the dot-com bubble burst, suggesting the market is overly cautious due to 'dot-com trauma.' Goodwin explained that NVIDIA’s acquisition of Grok was a strategic move to enter the fast inference space, acknowledging that SRAM-based chips from Grok offered a solution for high-speed token generation that NVIDIA’s HBM-based GPUs did not. However, he characterized the Grok solution as transient, arguing it lacks the memory capacity for long-context attention and compute density for pre-fill. He believes NVIDIA will continue to dominate by deploying heterogeneous systems, such as combining Rubin GPUs with Grok chips for pre-fill/decode disaggregation, while maintaining its position as the primary supplier for the majority of AI workloads. The hosts view the market’s resilience to negative news as a sign of strength, noting that Nvidia’s loss may signal it is no longer the 'untouchable number one,' while the surge in AMD and Broadcom suggests the market does not believe the AI supercycle is stalling.