Nvidia shares rose 0.4% to $195.75 in premarket trading on Tuesday, ending a first half that trailed the broader semiconductor sector. The stock is up 4.5% for the year through Monday, much less than the PHLX Semiconductor Index’s 94% gain over the same period. Here’s a look at why Nvidia has underperformed and what investors are focusing on for the rest of the year.
The main reason is that AI infrastructure spending is now spread across more semiconductor suppliers than last year. Competition, which used to focus mostly on Advanced Micro Devices, now includes custom chip designers and CPU specialists like Intel. This wider field has reduced the strong investor interest that once went mostly to Nvidia.
Nvidia’s next-generation Vera Rubin hardware will be a key factor in the second half of the year. It is still unclear if it will restore the performance lead that has made Nvidia the top choice for AI infrastructure in the past. Even if the new hardware performs well, big tech companies may not want to spend most of their hardware budgets with just one supplier, especially as they face more questions about their overall spending.
UBS Global Wealth Management’s chief investment officer said in a research note that recent share price drops among major hyperscalers show that shareholders are putting more pressure on companies to justify their AI spending. He also noted that the risk of slower growth in capital spending has increased slightly.
Another short-term challenge came up this week. Taiwanese investigators raided Super Micro Computer’s offices as part of an investigation into claims that Nvidia chips were smuggled to China. Prosecutors have charged six people with document forgery and breach of trust, according to the Wall Street Journal. Super Micro said it is working with authorities in Taiwan and elsewhere to protect its technology and intellectual property. Both Super Micro and Nvidia did not immediately respond to requests for comment.
