NVIDIA (NVDA.US) is facing growing concerns about its weakening grip on the semiconductor market for AI computing. These worries are now reflected in its stock performance. The chipmaker's shares fell 2.6% on Tuesday following reports suggesting Alphabet's AI processors are making progress. Since the beginning of the month, the stock has dropped 14%, erasing over $700 billion in market value as investors grow wary of an AI spending bubble and NVIDIA's circular investments in startups like OpenAI, which are also its customers. The stock continued to dip slightly in pre-market trading Wednesday, signaling further declines.

This sell-off has pushed NVIDIA's forward P/E ratio down to 25x, compared to around 34x at the start of the month. "NVIDIA's valuation is built on the idea that it will maintain market share," said Adam Sarhan, CEO of 50 Park Investments. "If it starts losing some of that share, investors will reassess its growth prospects and valuation."

Currently, NVIDIA trades at a discount to the "Magnificent Seven" index, which has a P/E of about 30x, and it is the worst-performing component of the group this month. However, NVIDIA's revenue and profit growth far outpace its peers (Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla). This year, NVIDIA's revenue is projected to grow 63%, while Meta, the second-fastest grower in the group, is expected to see 21% growth. Sarhan noted that this growth level makes the stock "relatively undervalued given its future potential."

**Wall Street Remains Bullish Despite Sell-Off** Wall Street, however, doesn’t seem overly concerned about NVIDIA's trajectory. Profit estimates for the next fiscal year have risen 12% from a week ago, and among the 80 analysts covering the stock, 74 maintain a "Buy" rating, with only one "Sell" rating. Even the sole bear, Jay Goldberg of Seaport Global Securities, raised his estimates after NVIDIA's earnings but remains skeptical.

"NVIDIA's numbers are great, and I raised my estimates," Goldberg said. "But supply constraints are easing, and once we shift from shortage to surplus, that’s the cycle turning. I don’t think it happens in three months, but I see it in 2026."

**Competition Heats Up, but NVIDIA Still Leads** For investors who have followed NVIDIA’s rise since OpenAI launched ChatGPT three years ago, competition was inevitable. NVIDIA’s biggest customers—Alphabet, Meta, Microsoft, and Amazon—have been eager to find alternatives to its high-end AI accelerators, which can cost over $30,000 each. These chips account for a significant portion of AI-related capital expenditures, expected to exceed $400 billion over the next four quarters.

Tech giants, key NVIDIA customers, have been developing their own chips with partners like Broadcom. AMD, NVIDIA’s top rival in AI chips, expects its AI business to generate "tens of billions" in annual revenue by 2027. Yet, there’s little evidence that competition is eating into NVIDIA’s sales. Last week, NVIDIA projected Q2 revenue of about $65 billion, $3 billion above Wall Street estimates, with the vast majority coming from AI chips.

"We’re thrilled with Google’s success—they’ve made huge strides in AI, and we continue to supply them," an NVIDIA spokesperson said, echoing the company’s statement on X. "NVIDIA is a generation ahead—it’s the only platform running all AI models across all computing environments. Compared to ASICs designed for specific AI frameworks, NVIDIA offers superior performance, versatility, and replaceability."

**Bullish Case: NVIDIA’s Lead Remains Strong** For NVIDIA bulls, the company’s substantial lead over competitors—amid massive investments in computing infrastructure—justifies optimism, even as rivals try to chip away at its dominance.

"Clearly, concerns about slowing growth are shaking some investors," said Peter Tuz, president and portfolio manager at Chase Investment Counsel, which holds NVIDIA as its second-largest position after Alphabet. "But NVIDIA’s growth remains strong enough that we still view it as a growth stock."

**Apple Nears NVIDIA in Market Cap** Meanwhile, Apple is inching closer to reclaiming its title as the world’s most valuable company, with its market capitalization narrowing the gap with NVIDIA.