Shares of chipmaker Nvidia (NVDA) are down more than 4% at the time of writing, even as other chip stocks move higher. This drop is likely due to the growing concerns about competition in the AI chip market, where Nvidia has been the clear leader. In fact, Amazon (AMZN) recently said that its in-house chip business is growing quickly, while Alphabet (GOOGL) announced plans to sell its custom AI chips to certain customers. Therefore, investors may be starting to wonder if Nvidia’s lead may begin to slip.
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Forget margin or options. Here's how the pros trade AMZNSeparately, the situation with China is also impacting the stock. More specifically, the recent crackdown on chip smuggling in China has pushed the price of Nvidia’s B300 servers close to $1 million each, according to Reuters. Since these advanced systems are restricted in China, supply is tighter, which is driving prices higher. Unfortunately for Nvidia, this could reduce demand and ultimately lead Chinese customers to use servers from competitors.
And as customers start building with alternative components, they may be less likely to switch back to Nvidia if restrictions are ever eased. As a result, this creates more uncertainty around Nvidia’s short-term outlook. Nevertheless, Nvidia continues to argue that its chips offer more flexibility than competitors, and both Amazon and Alphabet are still major customers. Because of this, while competition is increasing, Nvidia remains in a strong position for now.
What Is a Good Price for NVDA?
Turning to Wall Street, analysts have a Strong Buy consensus rating on Nvidia stock based on 40 Buys, one Hold, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average Nvidia price target of $274.38 per share implies 36.7% upside potential.
