• NVIDIA shares tumbled more than 6% on Thursday, marking their steepest single-day decline since late 2023.
  • The sell-off was triggered by reports that Meta Platforms is in advanced talks to spend billions on AI chips from Google, a move that could challenge NVIDIA's market dominance.
  • The development signals a potential shift in the AI hardware landscape, with large tech firms exploring alternatives to NVIDIA's GPUs.

NVIDIA Corp. faced a sharp market correction as its stock plummeted over 6% in Thursday's trading session, a sell-off that erased tens of billions in market value. The drop represents the chipmaker's most significant one-day percentage loss in more than seven months, shaking investor confidence that had been buoyed by a seemingly unassailable position in the artificial intelligence hardware market.

The catalyst for the decline emerged from reports that Meta Platforms is actively negotiating a major deal to purchase AI chips from Google. According to people familiar with the matter, the potential multi-billion dollar agreement would see Meta utilizing Google's custom-designed Tensor Processing Units (TPUs) for its AI workloads. Such a partnership would represent one of the most substantial challenges yet to NVIDIA's dominance, as Meta has been one of the largest buyers of NVIDIA's flagship H100 GPUs.

"When a whale like Meta starts seriously looking at alternatives, the market has to reprice the growth narrative," said a technology sector analyst who asked not to be named because the discussions are private. "It introduces credible competition into a market that was largely seen as a one-horse race."

The news immediately reverberated across the tech sector. While NVIDIA shares sank to their lowest level in three weeks, Alphabet Inc., Google's parent company, saw its stock rise on the prospect of its TPU technology gaining a major external customer. The contrasting market movements highlight how quickly the competitive dynamics in the AI chip space are evolving.

NVIDIA's communications team did not immediately respond to requests for comment on the market movement or the reported Meta-Google discussions. A spokesperson for Meta declined to comment on what they described as "market speculation."

This development arrives at a critical juncture for NVIDIA, which has posted record revenues throughout 2024 fueled by unprecedented demand for its AI accelerators. The company's data center segment, which includes its AI chips, has been the primary engine of its growth, with sales more than tripling in its most recent fiscal year. However, the prospect of its largest customers developing or sourcing alternative AI chips has long been viewed as the most significant threat to its long-term pricing power and market share.

Competition in the AI accelerator space has been intensifying, with Amazon developing its own Inferentia and Trainium chips, Microsoft working on custom AI processors, and various startups entering the fray. Still, Google's TPUs emerging as a viable alternative for external customers like Meta represents a new phase in this competition—one where NVIDIA's customers become its competitors in supplying the broader market.

Market technicians noted that NVIDIA's decline occurred on heavier-than-average volume, suggesting broad-based selling rather than isolated profit-taking. The stock's relative strength index dipped into oversold territory for the first time since November, potentially setting the stage for a near-term technical bounce, though the fundamental concerns about competition are likely to persist.

Correction: An earlier version of this article misstated the timeline for NVIDIA's previous significant one-day decline. It was in late 2023, not early 2024.