NVIDIA Faces Growing Threat as Tech Giants Develop In-House AI Chips

NVIDIA, whose GPUs dominate the AI chip market with 86% share, has seen its stock drop 9% over six sessions from a record high on April 27. Investors are increasingly concerned that major customers—including Alphabet, Amazon, Meta, and Microsoft—are building custom chips that could erode NVIDIA's near-monopoly. The Information reported Anthropic plans to spend $200B over five years on Google's TPU chips, and Alphabet just began offering its TPUs to select customers. Amazon's Trainium line has $225B in revenue commitments, including a multi-billion dollar deal with Meta, which is also preparing its own homegrown AI chips. Intel and Qualcomm are making headway in data centers too.

Despite these threats, NVIDIA's revenue is booming, with projected 70% expansion this fiscal year, dwarfing other megacaps. However, growth is expected to slow to 32% in fiscal 2028. The four biggest customers—Alphabet, Amazon, Meta, Microsoft—plan $725B in capex this year and account for 45% of NVIDIA's revenue, but Bank of America notes they emphasize "heterogenous deployments" mixing NVIDIA and custom chips. NVIDIA's market cap of $4.8T is close to being overtaken by Alphabet at $4.7T. The stock is up only 5% year-to-date compared to the Philadelphia semiconductor index's 55% jump, making NVIDIA the worst performer in the index. With earnings due May 20, bulls argue demand is so massive it can sustain both NVIDIA and custom chips, but the threat is real and growing.