Nvidia responded to the threat from Google that collapsed the stock. Should investors be afraid?

Nvidia's AI chips are still "a generation ahead" of the industry, Nvidia has assured. The statement came after the chipmaker's stock plunged on reports that Meta was going to use Google's processors. The market saw this as Alphabet's return to the AI race and a threat to Nvidia, but according to analysts, the AI chip market is far from saturated and there is enough room for everyone.

Nvidia said on social network X that its AI chips are more versatile and powerful than so-called ASIC processors - specialized chips that are built for one company or a specific function. Google's TPU chips are just one of those.

"We're excited about Google's success - they've made great strides in AI, and we continue to deliver our products to them. [That said,] Nvidia is a generation ahead of the industry - it is the only platform that runs all AI models and does so everywhere computing is done," the company wrote.

The post came after reports that Meta, one of Nvidia's key customers, may strike a deal with Google to use its chips for data centers. On the day of publication - November 25 - shares of the leading chipmaker fell by 2%, and momentarily they were losing 7% at once. At the opening of trading on November 26, quotes Nvidia jumped by 2.5%.

Investors have taken reports of Meta and Google's collaboration and the successful launch of the new Gemini 3 as "Alphabet's return to the AI race," and some are "scared shitless that the company might win the AI war," explains Melius analyst Ben Reitzes, as quoted by MarketWatch.

That said, Bernstein's Stacey Rasgon believes the market is paying too much attention to the question of who will win - Nvidia's graphics processing units (GPUs) or Alphabet's TPUs. Other players such as OpenAI are "taking a similar Meta diversified approach" by buying chips from Nvidia's rivals AMD and Broadcom, the analyst noted. "And that hasn't slowed [Nvidia] down at all, given the current level of demand for computing," he wrote. Rasgon recalled that Nvidia CEO Jensen Huang last month projected $500 billion in revenue from Blackwell and Rubin AI chips by the end of 2026.

According to analyst Bernstein, the AI hardware market has probably not yet reached a "mature, saturated" stage, and it's the size of the market, not market share, that matters. "If the market is large, both GPUs and ASICs will thrive. If not, "both will find themselves at a disadvantage," Rasgon said.

The deals around AI in recent weeks have been dominated by a "winner-take-all" mindset, says Mizuho analyst Jordan Klein. But "the AI arms race won't be won or lost" this month, he reminds us. Rather, it's "a marathon in which the leader will change many times." "The biggest players with cutting-edge models will continually spend and invest to gain an edge and get ahead of the competition," Klein said. - This will lead to "even more investment, hiring and infrastructure expansion for power/computing/memory/high-speed connectivity."

Since the beginning of the month, the chipmaker has lost 14% of its capitalization, equivalent to more than $700 billion.

Investors are increasingly wary of a bubble in AI spending, as well as Nvidia's "closed-loop" investments in companies - such as OpenAI - that are both its customers, Bloomberg notes. Following the publication of Meta and Google's possible collaboration, Nvidia shares are trading at a much lower multiple - priced at about 25 times estimated earnings over the next 12 months, compared with a multiple of 34 earlier this month, the agency writes.

In November, the chipmaker's securities were the worst in Bloomberg's Magnificent Seven index, the agency reports.

However, Wall Street doesn't seem to be too worried about the company's prospects just yet, Bloomberg notes. Of the 80 analysts who cover its stock, 74 recommend buying it, and only one recommends selling.

This article was AI-translated and verified by a human editor