NVIDIA's close ties with OpenAI, major cloud providers, and supply chain partners have intertwined their respective outlooks. The company's latest quarterly results, seen as a key indicator of the AI boom, failed to prevent a stock decline even after exceeding market expectations.

The day after releasing its Q4 FY2026 earnings, NVIDIA's shares fell 5.46% on February 26, wiping out over $250 billion in market capitalization—nearly equivalent to Intel's entire market value of $227.1 billion—and closing with a market cap of $4.5 trillion. Other chip stocks also declined: AMD dropped 3.41%, Broadcom fell 3.19%, and foundry giant TSMC decreased by 2.82%.

NVIDIA reported record revenue of $68.1 billion for the recent quarter, a 73% year-over-year increase, and provided a Q1 FY2027 revenue midpoint guidance of $78 billion. These figures significantly surpassed analyst consensus estimates of $66 billion for Q4 and $72 billion for the next quarter, according to LSEG data.

Despite the strong numbers, the report did not instill sufficient market confidence. Data from Vanda Track indicated that retail investors flocked into NVIDIA stock following the earnings release, but they were not the primary drivers of the sell-off. Institutional investors expressed concerns about NVIDIA's future market trajectory.

One issue was the interpretation of management's commentary during the earnings call. NVIDIA's CFO noted that slightly over 50% of data center revenue came from hyperscale cloud providers and cited analyst projections of nearly $700 billion in capital expenditure from the top five cloud providers by 2026. Although she emphasized diversification among other customer types, analysts focused on questions about whether cloud providers' capital spending had peaked and potential cash flow issues from heavy expenditures.

CEO Jensen Huang expressed confidence in these customers' cash flow growth, citing incredible compute demand generated by AI agents worldwide and stating that AI has reached a tipping point where useful tokens are being produced profitably for cloud providers. However, Michael O’Rourke, Chief Market Strategist at JonesTrading, suggested investors sense "trouble in paradise," arguing that Huang's described scenario isn't materializing. He pointed to recent earnings from Amazon, Meta, Microsoft, and Google showing cash flows stabilizing or declining.

Analyses of major cloud providers' free cash flow trends also diverged from Huang's outlook. Morgan Stanley analysts noted Amazon's projected $200 billion capital expenditure for this year could lead to nearly $17 billion in negative free cash flow, while Alphabet's capex is expected to reach $185 billion this year, potentially rising to $250 billion by 2027. Pivotal Research projected Alphabet's free cash flow could fall by 90% year-over-year.

O’Rourke added that if management isn't transparent about widely known information, investors become anxious about unknown risks. Shortly after NVIDIA's earnings, after-hours trading showed no significant boost for Meta, Microsoft, Google, and Amazon, with slight declines observed.

Separately, prominent short-seller Michael Burry questioned a specific data point in a blog post, highlighting that NVIDIA's purchase obligations surged from $16.1 billion to $95.2 billion year-over-year. He suggested this reflects TSMC requiring more upfront funding for custom chip production and packaging, indicating NVIDIA is placing non-cancelable orders amid uncertain demand and that its chip business has grown highly complex.

Burry's concerns have some basis. In January, Huang acknowledged that technology is becoming increasingly complex, describing the transition from the simpler Hopper architecture to the challenging Blackwell and nearly "impossible" Rubin designs. While emphasizing rising R&D costs, Huang also discussed deeper collaboration with TSMC, noting the foundry must work extremely hard.

Concurrently, NVIDIA faces customer diversification strategies and in-house chip development efforts. After announcing a multi-million chip deployment deal with Meta for Blackwell and Rubin architectures, AMD subsequently revealed a separate agreement with Meta for 6 gigawatts of GPU capacity. Meta's announcement regarding the AMD partnership was notably nuanced, highlighting a flexible technology ecosystem built with diverse partners while linking external collaborations with its own MTIA chip development project.

As the U.S. stock market's most valuable company, NVIDIA's movements are closely watched. Its interconnected fate with OpenAI, major cloud providers, and supply chain partners means their prospects are closely linked. Following rapid share price appreciation, NVIDIA's stock has largely traded sideways for about six months since mid-August, briefly touching a $5 trillion market cap before pulling back.

Despite ongoing concerns about massive AI infrastructure investments, NVIDIA's recent stock performance has outperformed several other large-cap tech stocks. Year-to-date, NVIDIA is down 0.86%, compared to declines of 9.92% for Amazon, 1.8% for Google, and 16.75% for Microsoft. Meta's stock has also retreated since February, falling 8.3% month-to-date.