Nvidia (NVDA) Stock Dips as It Bets on AI Startups to Fight Back Against Google and Amazon

TLDR

• Nvidia stock was down about 0.5% in premarket trading at $196.68, and opened Thursday at $197.58.
• Nvidia plans to back smaller AI cloud companies in exchange for a share of their revenue.
• The move comes as investors worry that big customers like Alphabet and Amazon are developing competing custom chips.
• Nvidia has already rolled out the model with Australian firms SharonAI and Firmus.
• Despite near-term pressure, Wall Street analysts maintain a consensus “Buy” rating with an average price target of $303.84.

Nvidia is down roughly 0.5% in premarket trading Thursday, sitting at $196.68, as the chipmaker unveiled a new revenue-sharing plan aimed at broadening its customer base beyond Big Tech.

NVIDIA Corporation, NVDA

The company announced it will support smaller AI cloud businesses by providing credit and backing in exchange for a cut of their cloud revenue. Nvidia CFO Colette Kress outlined the plan in a blog post, describing it as a model that gives Nvidia “a recurring, usage-linked earnings stream.”

That kind of predictable revenue stream could help calm investor nerves about a potential boom-and-bust cycle tied to large one-time chip purchases.

The core concern driving the move is straightforward: Alphabet and Amazon are increasingly rolling out their own custom AI chips, which could reduce their dependence on Nvidia hardware over time. Nvidia needs more customers, and smaller AI cloud providers are now in its sights.

The company has already put the model into practice. Australian firms SharonAI and Firmus have both announced data center deals using Nvidia hardware under the new revenue-sharing structure in recent weeks.

This goes a step further than Nvidia’s earlier strategy of investing in so-called neoclouds like CoreWeave and Nebius. Those companies use Nvidia chips too, but under the new model, Nvidia earns ongoing cloud revenue on top of standard product sales.

Stock Under Pressure

Nvidia is up just 5.9% year-to-date through Wednesday’s close, lagging the broader semiconductor sector. The stock sits well below its 52-week high of $236.54, though above its 52-week low of $152.97.

The stock’s 50-day moving average is $210.48, and it’s currently trading below that level — a sign of recent softness.

There’s also notable insider selling. Director Mark A. Stevens sold over 885,000 shares in June for more than $186 million. Insiders have sold roughly $410 million worth of stock in the past quarter.

Analysts Still Bullish

Despite the near-term headwinds, Wall Street hasn’t turned its back on Nvidia. Morgan Stanley has a $288 price target and an “overweight” rating. Rosenblatt Securities sits at the high end with a $325 target.

BNP Paribas Exane raised its target to $285 following Nvidia’s last earnings report, which came in strong — EPS of $1.87 beat the $1.76 consensus, and revenue of $81.61 billion topped estimates by over $3 billion. Revenue was up 85.2% year over year.

The company also approved an $80 billion buyback program and raised its quarterly dividend from $0.01 to $0.25, a move that signals confidence from the board.

Of 54 analysts covering the stock, 48 have a Buy rating and three rate it a Strong Buy. The consensus price target stands at $303.84 — roughly 54% above Thursday’s opening price.

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