Nvidia (NASDAQ:NVDA) is on top of the world right now, and with good reason. The software and hardware manufacturer has had the good fortune in the past to ride on certain tech hype waves. But this year, the high sentiment building on NVDA stock seems different. It’s capturing attention — and thus many millions of dollars — from investors far and wide for its implications in the growing artificial intelligence (AI) industry. It also successfully navigated what many thought would be a tumultuous earnings season, thanks in large part to its new AI lean. Yet today, NVDA stock is on the skids. What’s the big deal?
Nvidia has been dominating the tech conversation in recent weeks, to the great benefit of some and to the chagrin of others. As the company’s Q4 earnings report approached, a consensus could not be reached on whether the company would sink or swim.
Though it disappointed greatly in terms of sales figures, it ended up doing less badly than Wall Street analysts had expected. This helped to bail the company out. But even more so, Nvidia executives’ many mentions of AI tech and the company’s capabilities in this field did well to drum up bullish sentiment, going against the narrative on paper. All in all, NVDA saw an 8% jump in the immediate aftermath of the call.
Artificial intelligence is the new tech buzz phrase, and it’s got Nvidia investors in its grips. The tech niche is taking off exponentially thanks to the rising popularity of chatbots and generative art programs being unleashed on the public. Much of the deep learning necessary for these AI tools can be traced back to Nvidia, too. The company’s graphics processors represent 95% of all the hardware used to train AI models.
NVDA Stock Slides as AI Competition Takes Shape
NVDA stock is riding high now, there’s no doubt. But today, investors are seeing a slight dip for the tech giant. The stock falling north of two points amid an otherwise-glowing week. It appears the downward trend could be the result of new competition emerging for the company.
Sapeon, a South Korean-born, California-headquartered tech start-up is coming to challenge Nvidia’s AI dominance. This week, the company is announcing its plans to seek a $400 million valuation with its new funding round. The company, founded in 2016, is looking to use the cash to develop a chip to compete with Nvidia.
Already, Sapeon is turning heads with its backing. The company’s largest investor thus far is South Korean telecommunication giant SK Telecom (NYSE:SKM) and several of its subsidiaries. Originally, Sapeon was founded under the SK Telecom umbrella before spinning out into a separate entity in 2022. Speaking on the company’s plans for this year, CEO Soojung Ryu tells CNBC it will develop a second chip for its fleet, manufactured by Taiwan Semiconductor (NYSE:TSM).
Nvidia’s new A100 chips are stoking bullish flames, and positioning the company to remain dominant in AI hardware for the next year. However, this news out of Sapeon suggests hefty competition is still to come. It provides context to the slight dip for NVDA stock today.
But there’s still reason to celebrate. Nvidia still dominates the AI chip market. And, it looks like OpenAI developers will need about 30,000 of the company’s GPUs soon.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
