Nvidia (NVDA) Stock: The AI King Is Losing Ground to Its Own Customers

TLDR

• NVDA is up 11% year-to-date but trails the PHLX Semiconductor Index’s 88% gain
• Big Tech customers like Microsoft and Meta are building in-house chips to cut AI infrastructure costs
• Q1 revenue hit $81.62B, up 85.2% year-over-year, beating estimates
• NVDA trades at a forward P/E of 20.2x, below the sector average of 26.8x
• Wall Street consensus is “Buy” with an average price target of $305.67

Nvidia stock opened at $207.41 on Wednesday after dropping 2.4% on Tuesday, and while it has gained 11% in 2026, it is well behind the PHLX Semiconductor Index, which is up 88% over the same period.

NVIDIA Corporation, NVDA

The gap is drawing attention. NVDA trades at a forward P/E of 20.2x, compared to the sector average of 26.8x — a discount that reflects growing questions about whether Nvidia can hold its grip on AI chip spending.

The core concern is straightforward: the massive wave of AI hardware investment is being spread across more players. Custom chip designers and CPU specialists are taking a bigger slice of budgets that once flowed almost entirely to Nvidia.

Microsoft and Meta — two of Nvidia’s largest customers — are developing in-house chips to reduce their reliance on third-party silicon. The goal is to lower infrastructure costs as data center spending eats into operating cash flow.

Hyperscaler Spending Could Hit a Wall

Epoch AI researcher Isabel Juniewicz flagged in a Tuesday post that aggregate capital expenditure across hyperscalers is on track to exceed operating cash flow around Q3 2026. That timeline puts pressure on Nvidia to diversify its customer base before Big Tech pulls back.

Nvidia is banking on new demand from robotics, orbital data centers, and government-backed AI platforms to fill any potential gap.

On the institutional side, Talos Eurisko Asset Management raised its NVDA stake by 21.1% in Q4, adding 38,149 units to bring its total to 218,900, valued at around $40.8 million. Institutional investors now hold 65.27% of the stock.

Insider activity tells a different story. CFO Colette Kress sold stock worth $7.46 million in March, and Director Mark A. Stevens offloaded $109.9 million worth in early June. Insiders have sold a combined $277.4 million in stock over the past quarter.

Earnings Beat, Buyback, and Raised Dividend

Despite the stock’s underperformance, Nvidia’s fundamentals remain strong. The company reported Q1 EPS of $1.87, beating the $1.76 consensus estimate, on revenue of $81.62 billion — ahead of the $78.42 billion forecast and up 85.2% year-over-year.

Nvidia also announced an $80 billion share buyback program and raised its quarterly dividend from $0.01 to $0.25 per share, payable June 26.

Analysts remain bullish. JPMorgan raised its price target to $280, Bank of America set a $350 target, and Mizuho sits at $300. The consensus target across 54 analysts stands at $305.67, with 48 Buy ratings and three Hold ratings.

Nvidia also raised around $20 billion in its first bond sale since the AI boom began, signaling confidence in continued infrastructure investment.

The stock has a 52-week range of $142.03 to $236.54 and a market cap of $5.02 trillion.

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