By Dan Gallagher
Nvidia is no longer the only AI chip game in town. But it is the largest by far, and the likelihood that it will be that way for the foreseeable future should count for something.
It hasn't counted for much lately. Despite strong financial reports and more blowout spending forecasts from its largest customers, Nvidia has been one of the weakest chip stocks this year.
The company's latest results posted Wednesday afternoon don't seem likely to shift that pattern. The occasion marked the 14th consecutive quarter that Nvidia's revenue and operating income beat Wall Street's targets, according to data from FactSet. The stock still fell a little over 1% in after-hours trading.
There are a mix of reasons for what UBS analyst Tim Arcuri describes as a "marked apathy" among investors on the AI powerhouse. At its closing market cap of $5.4 trillion ahead of Wednesday's report, Nvidia is already the world's most valuable company by a wide margin. The gap with Google-parent Alphabet now sits at more than $700 billion, and that is a company with a massive, a fast-growing cloud-computing arm, highly competitive AI models and a burgeoning AI-chip business of its own.
Nvidia is also no longer the shiny new thing, as it has now been three full years since demand for AI infrastructure started showing up in the company's financial reports. Investors instead have been gravitating to what Morgan Stanley analyst Joe Moore described as "secondary and tertiary AI beneficiaries" that are also benefiting from the booming investment cycle. Intel's shares have soared more than 200% this year, while memory-chip maker Micron is up more than 150% and nearing the trillion-dollar threshold.
Still, Nvidia's uniquely strong business prospects and the relative bargain multiple for its stock should warrant a closer look from investors. No other company of Nvidia's scale is growing as rapidly -- and that growth is accelerating. Nvidia projected revenue hitting $91 billion for the current fiscal quarter ending in July, which represents a near doubling in sales from the same period last year. The average year-over-year growth rate for public companies generating at least $50 billion in quarterly revenue is 14%, according to data from S&P Global Market Intelligence.
Nvidia is indeed facing more competition in its core market. AI computing needs are diversifying from the GPU chips that are the company's stronghold, creating an opportunity for CPU chips from companies like Intel, AMD and Arm.
Nvidia is addressing that with its own CPU chip that it will sell decoupled from GPU systems for the customers who prefer that option. The company said on Wednesday's call that it has "visibility" to nearly $20 billion in CPU revenue this fiscal year. That is just below the $22 billion that Intel's entire data-center business is expected to generate for the same period.
But the GPU will remain the workhorse of AI for some time. This was even evident in the much-heralded IPO filing of SpaceX on Wednesday. SpaceX specifically touted its Colossus data centers that are using Nvidia's most state-of-the-art system called Grace Blackwell. Those GPU clusters help form the backbone of the company's xAI business, which recently landed a deal with Anthropic that has the ascendant AI lab paying over $1 billion a month for the next three years for computing resources.
The risk is that SpaceX and the coming IPO filing from OpenAI could divert even more attention away from Nvidia, as investors jockey for exposure to new AI names. But they should watch where the money actually goes. SpaceX spent $12.4 billion on capital expenditures last year for xAI -- triple what it spent on its actual space business -- and said it expects spending to remain "substantial" going forward, even as free cash flow remains in negative territory. Elon Musk's rocket company will be just one more thing sending Nvidia's sales to the moon.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
May 21, 2026 05:30 ET (09:30 GMT)
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