NVIDIA Stock Price Slips Amid Soaring Competition: Buy the Dip?

Key Insights

• NVIDIA stock has declined for six straight sessions ahead of earnings on May 21.
• Investors are watching rising GPU competition from AMD, Intel, and custom ASIC chipmakers.
• Technical indicators still point to a broader bullish continuation despite the pullback.

NVIDIA stock extended its decline this week as investors weighed growing competition risks ahead of the company’s quarterly earnings report. NVDA shares have now fallen for six consecutive trading sessions and currently trade near their lowest level since April 16.

The pullback comes as semiconductor rivals expand their artificial intelligence chip offerings while major cloud companies accelerate development of internal ASIC chips.

NVIDIA Stock Slips Amid Rising Competition Concerns

A major concern for NVIDIA today is heightened competition that may affect its performance over time. This competition is coming from traditional semiconductor companies that have started to gain market share. The most notable one is AMD, which has gained a 10% share in the GPU industry.

AMD stock price has gone parabolic | Source: TradingView

Intel, a company that NVIDIA invested in last year, has also made plans to gain share in the booming GPU industry. Just recently, the company announced that Google will use its Xeon chips in the coming years.

On top of this, additional competition is coming from Chinese companies such as Cambricon, Biren Technologies, Moore Threads, and Meta X. Some of these companies have created chips comparable to those made by NVIDIA.

Most importantly, NVIDIA’s clients are working on their ASIC chips. This includes companies like Microsoft, Google, Meta Platforms, and OpenAI, the creator of ChatGPT. History shows that ASIC chips can affect semiconductor companies. A good example of this is what happened to Intel when Apple moved from its chips.

Still, these fears are likely being exaggerated as NVIDIA has more room to grow in the industry. It is also in a pole position with the current Blackwell chips and the upcoming Rubin. Most importantly, NVIDIA owns the Compute Unified Device Architecture (CUDA), a software platform that helps developers transform general-purpose GPUs for specific tasks.

These qualities explain why a company like Amazon has pledged to spend billions of dollars on NVIDIA chips despite having its own products. According to Reuters, Amazon plans to buy 1 million chips from NVIDIA through 2017.

Focus Shifts to Upcoming NVIDIA Earnings

The industry’s most important companies have already published their financial results. This includes its contractors, like Taiwan Semiconductor, and its clients like Microsoft, Google, and Meta Platforms. Its top competitors, like Intel and AMD have all published strong financial results. Its clients have increased their capital expenditure plans to $725 billion from $675 billion previously.

Therefore, analysts expect the company to report strong financial results on May 21. Analysts estimate its quarterly revenue will be nearly $80 billion. This figure will represent a 78% annual growth rate, making it one of the fastest-growing companies in the industry.

NVIDIA’s annual revenue is expected to be $370 billion this year. However, this figure may jump to as high as $400 billion. One major catalyst for this is Donald Trump’s trip to China, where he will likely reach a deal on semiconductor shipments to the country. NVIDIA believes that it can make as much as $56 billion from the Chinese market.

NVIDIA stock is still highly undervalued, trading at a forward price-to-earnings multiple of below 30. This is a bargain considering that it is one of the fastest-growing and most profitable companies in the US.

NVDA Stock Technical Analysis

The three-day chart shows NVIDIA stock pulling back after reaching a record high recently. The decline formed an evening star candlestick pattern, which traders often view as a bearish reversal signal. However, the broader structure still remains constructive.

NVDA has now successfully retested the upper boundary of a bullish flag pattern after breaking above it earlier. That move suggests a potential break-and-retest continuation setup.

The stock also continues trading above its major moving averages, keeping the broader uptrend intact for now.

NVDA stock chart | Source: TradingView

If buyers defend current support levels, NVIDIA stock could resume its broader uptrend after earnings. A sustained move higher may place the previous record high back into focus.

However, weaker guidance or slowing AI spending trends could increase short-term downside pressure despite the longer-term bullish structure.

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