Nvidia in Focus: Analysts See Only Temporary Decline

The stock price of Nvidia recently entered a correction zone, triggered by changes in the narrative around artificial intelligence as the year 2024 draws to a close. Since its record high of $152.89 on November 21, the stock's value has fallen by 17 percent, approaching a bear market, which Wall Street traders define as a 20 percent decline from the recent peak. Particularly noteworthy is the 7 percent drop last week following comments from Microsoft CEO Satya Nadella. In a podcast interview, Nadella pointed out that the hype around AI chip demand is waning. When asked whether Microsoft remains "supply chain constrained" in building its AI technologies, he stated that while the energy supply poses a challenge, the chip supply does not. Nadella expressed optimism for 2025 and confirmed a more positive outlook for 2026. These statements caused Nvidia's shares to fall, as Microsoft accounts for an estimated 20 percent of Nvidia's revenue. These new insights suggest a change in the supply and demand dynamics for Nvidia's AI chips. The enormous demand in the past two years forced Nvidia to be selective. Reportedly, tech-savvy billionaires had to privately ask Nvidia CEO Jensen Huang for priority in supply. Although Nadella's statements do not necessarily indicate a decrease in demand for Nvidia's main product but rather an adjustment of the supply chain, they raise valuation questions. Analysts, enthusiastic about booming demand, might now be concerned that one of Nvidia's largest customer groups is indicating that it has overcome chip constraints. Nevertheless, it should be noted that many on Wall Street expect the next Nvidia chip, the Blackwell, to be sold out for at least a year after its market launch. However, Nadella's comments could dampen the most optimistic expectations and encourage investors to consider whether Nvidia's growth story will continue in the coming year.