Nvidia (NVDA) Plunges 4% Amid AI Slowdown... Is 'Buy' Still the Best Option?

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Nvidia (Nvidia, NVDA) stock fell 4% due to calls for adjusting the pace of AI development, but Barron's rated it as being in the most advantageous position in the semiconductor industry.

According to Barron's on September 14 (local time), Anthropic CEO Dario Amodei and OpenAI CEO Sam Altman agreed over the weekend that there is a need to slow down the pace of AI development. Altman also stated that the likelihood of OpenAI pursuing an IPO this year is low. As related concerns spread, Nvidia fell 4% in early trading. Broadcom (Broadcom, AVGO) dropped 3.9%, and AMD fell 6.2%.

If the pace of AI development by OpenAI and Anthropic actually slows down, it would be a burden for Nvidia. Demand for chips from both companies could decrease, and the investment effects from the IPOs that Nvidia anticipated could be delayed. Nvidia invested $30 billion in OpenAI, which was valued at $730 billion in February. Late last year, it decided to invest up to $10 billion in Anthropic, which was then known to have a corporate value of approximately $350 billion.

However, Nvidia is reducing its reliance on a few large customers. Its strategy is to broaden its business base across the entire AI ecosystem by expanding startup investments and supporting open-source AI models. Earlier this month, it agreed to acquire Hugging Face, an open-source AI development platform, for $12.9 billion. Barron's pointed out that this strategy could mitigate the impact of a slowdown in development by OpenAI and Anthropic.

SpaceX is also a key variable. Elon Musk agreed with Amodei's assertion about adjusting the pace of AI development but did not reveal specific plans for a halt. Instead, Musk said on Sunday, “I'm very confident that we'll launch Nvidia-powered AI servers into space next year.” He had previously stated that SpaceX plans to use only Nvidia hardware for its ambitious orbital data centers.

Barron's assessed that even if OpenAI and Anthropic decide to slow down, demand from SpaceX and open-source developers could act as a buffer for Nvidia. While a real slowdown in AI development would be a negative for the semiconductor industry as a whole, Nvidia, which has expanded its customer base and ecosystem, is judged to be in the most advantageous position relative to others.

[Key Article Summary]

-Nvidia fell 4% in early trading as concerns about adjusting the pace of AI development spread, while Broadcom and AMD also dropped 3.9% and 6.2%, respectively.

-Nvidia invested $30 billion in OpenAI and committed to investing up to $10 billion in Anthropic, so a slowdown in development by these two companies could be a burden.

-Barron's cited customer diversification, including the acquisition of Hugging Face and deals with SpaceX, as reasons why Nvidia is in the most favorable position among semiconductor companies even amid an AI slowdown.

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