Nvidia's Rally to New Highs Pauses as Google AI Chips Pose Challenge

Barron's reports a familiar issue is once again troubling Nvidia (NVDA-US). The chipmaker's stock has recently been challenging record highs, but its advance paused on Wednesday (23rd), with Google being part of the problem.

Nvidia closed down 1.4% at $225.51. The stock has struggled to break past its all-time closing high of $235.74, set on May 14.

Part of the reason lies in macroeconomic factors affecting the broader semiconductor industry—the Philadelphia Semiconductor Index has fallen 5.9% over the past three months. But Nvidia also continues to face market concerns about competitors chipping away at its dominant position in AI chips.

The biggest threat comes from Alphabet's (GOOGL-US) Google and its Tensor Processing Units (TPUs), co-designed with Broadcom (AVGO-US). While the relationship between Nvidia and Google is typically amicable, investors closely watch which chips large enterprises actually adopt.

So when tech outlet The Information reported that Anthropic is negotiating to lease up to 1 gigawatt of computing capacity from Stream Data Centers—with much of it powered by TPUs—it could unsettle the market.

Just a week earlier, a syndicate of 10 banks agreed to lend $22 billion to Crux AI, a cloud computing startup backed by Blackstone and Alphabet. That funding will be used to purchase TPUs.

Still, this may not represent a major problem for Nvidia. After all, Anthropic recently signed a $35 billion cloud computing deal with provider Lambda, using Nvidia chips. According to The Wall Street Journal, Anthropic also signed a $45 billion agreement with Nscale, another new cloud provider supported by Nvidia.

Yet this serves as a reminder that large customers like Anthropic are actively working to reduce their reliance on Nvidia. In August, Anthropic confirmed it was building an internal chip team, following in the footsteps of ChatGPT-maker OpenAI.

As Barron’s previously reported, Nvidia is fighting back by supporting open-source AI communities to broaden its customer base. However, replacing one Anthropic requires many small AI companies—a pressure Nvidia continues to face.