Nvidia (NVDA) is entering 2026 as a global leader, but its position is under more stress than ever. Since hitting a peak in late October, the stock has dropped over 9%, losing about $460 billion in value. While the company is still up nearly 1,200% since the end of 2022, investors are starting to worry that the massive spending on AI might finally be slowing down.
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This shift comes at a time when Nvidia is no longer the only game in town. Here is the logic behind why even the AI king is feeling the heat this year.
Tech Giants Build Internal Solutions
For years, companies like Google (GOOGL), Amazon (AMZN), and Microsoft (MSFT) had to wait in line to buy Nvidia’s chips, which can cost over $30,000 each. Now, those same customers are building their own processors to save money. Google’s latest AI models are already being optimized for its own internal chips, and Meta (META) is reportedly looking to rent chips from Google instead of buying more from Nvidia.
Analysts warn that keeping a 90% share of the market will be almost impossible as these huge companies look for cheaper options. While Nvidia is still the leader, the move toward custom chips means the company has to work harder to prove its high prices are worth it.
Jensen Huang Highlights Skyrocketing Demand
Despite the risks, Nvidia CEO Jensen Huang is moving fast. At the CES trade show in Las Vegas this week, he announced the next generation of chips called Rubin. Huang claims these new chips will handle models that are growing at an incredible pace.
“Demand for Nvidia GPUs is skyrocketing,” Huang said. “It’s skyrocketing because models are increasing by a factor of ten, an order of magnitude every single year.” By launching Rubin earlier than expected, Nvidia is trying to keep its customers focused on the future and away from the cheaper options being offered by competitors.
Nvidia’s Profit Margins Face New Pressure
Investors are also tracking Nvidia’s gross margins very closely. In the past, these margins were near 78%, but they recently dipped as the company spent more to launch its newer Blackwell chips.
Nvidia predicts its margins will climb back to 75% soon, but any small miss could scare Wall Street. If rivals like AMD (AMD) continue to offer cheaper alternatives that do the job just as well, Nvidia might be forced to lower its prices, which would eat into the massive profits that fueled its stock run.
Is Nvidia a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 39 Buys, one Hold, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $263.39 per share implies 40% upside potential.
