Nvidia Faces Intensifying AI Chip Competition as Citi Lowers Price Target

Nvidia's Market Position Under Pressure

Nvidia, the dominant force in AI chip manufacturing, is facing increased scrutiny from Wall Street as competition in the artificial intelligence arena intensifies. Citi analyst Atif Malik has lowered Nvidia's price target from $220 to $210, signaling growing concerns about the company's market position 1

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Source: ET

Rising Competition from Broadcom and Google

The price target cut comes in the wake of Broadcom's strong quarterly results and a significant $10 billion order for custom AI chips from an undisclosed customer. This development, coupled with Google's increasingly competitive tensor processing units (TPUs), poses a substantial threat to Nvidia's Graphics Processing Units (GPUs) sales 1

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Malik predicts that Nvidia's 2026 GPU sales could be approximately 4% lower than previously estimated due to this growing competition. He anticipates that AI XPU (accelerated processing unit) chip sales may outpace GPU sales by 2026, driven by adoption from major tech players like Google, Meta, and Amazon 2

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Impact on Nvidia's Future Sales

The analyst estimates a significant $12 billion reduction in Nvidia's 2026 GPU sales compared to previous projections. This includes a $2 billion reduction from Meta alone, implying about a 5% hit to the prior $232 billion forecast for 2026 merchant GPU sales 2

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Nvidia's Recent Performance and Challenges

Despite the price target cut, Nvidia's stock has shown resilience, with shares up 24.4% year-to-date. However, the company has faced challenges, including missed expectations in data center revenue for two consecutive quarters. Concerns are also growing about Nvidia's client concentration, with its top two customers accounting for 39% of total revenue in the July quarter 1

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Potential Upside and Future Outlook

While the competitive landscape is evolving, Nvidia still maintains a dominant position, commanding over 85% of AI compute sales. The company's future performance may also benefit from potential GPU shipments to China, which could provide an upside if resumed 1

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Investors and industry watchers are now looking forward to CEO Jensen Huang's GTC keynote speech scheduled for October 28, which may provide further insights into Nvidia's strategy to maintain its market leadership in the face of growing competition 1

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Source: Benzinga