Nvidia Shares Slide Nearly 3% as AI Circular Financing Worries Deepen Ahead of Microsoft, Meta Earnings

Nvidia shares fell 2.99%, or $5.89, to $191.12 in Wednesday afternoon trading, extending a multi-session slide that has wiped out an estimated $238 billion in market value over just two trading days as investors grow increasingly uneasy about the sustainability of artificial intelligence infrastructure spending.

The decline marks a continuation of a broader selloff that has gripped Nvidia and the semiconductor sector more broadly throughout the week. The stock closed Tuesday at $197.01, up a modest 0.3% for that session, with its market capitalization holding just under $4.8 trillion, narrowly below Apple’s valuation. Nvidia had fallen roughly 5% on Monday alone following news that the company is reportedly in talks to backstop as much as $250 billion in funding for OpenAI, an arrangement that would allow the AI research company to lease computing power tied to a major U.S. data center project.

That reported financing arrangement has reignited investor concerns about what analysts describe as “circular financing” within the AI industry, a structure in which chip suppliers like Nvidia are simultaneously major investors in the very customers who purchase their hardware. Critics of such arrangements argue they can create a feedback loop that inflates reported demand for AI infrastructure, since revenue booked from a customer partly funded by the supplier itself may not reflect fully independent market demand. The potential OpenAI guarantee would rank among the largest financing arrangements of its kind that Nvidia has entered into, according to reporting on the matter.

The broader chip sector selloff accompanying Nvidia’s decline has hit rival companies even harder in percentage terms. Advanced Micro Devices fell more than 5% during Monday’s session, while memory chipmakers bore some of the heaviest losses of the week: Micron Technology dropped more than 2% and SK Hynix fell more than 7% during the same stretch, before the South Korean chipmaker’s losses deepened further later in the week following its own disappointing earnings report.

Concerns about Chinese competition have also weighed on sentiment toward Nvidia specifically. China has moved to restrict imports of Nvidia’s less powerful H200 chips, planning to allow domestic AI companies to purchase only limited volumes while capping approvals at less than half the amounts Chinese firms have requested, according to reporting citing government sources. That restriction compounds longer-running challenges Nvidia has faced in the Chinese market, where a series of earlier U.S. export controls had already significantly curtailed the company’s ability to sell its most advanced chips to Chinese customers.

Nvidia CEO Jensen Huang has publicly acknowledged the disconnect between the company’s underlying financial performance and its recent stock price movements. Despite reporting what some analysts have described as one of the strongest quarters in semiconductor industry history, including $81.6 billion in quarterly revenue, a 25-fold increase to its dividend, and an $80 billion share buyback authorization, Nvidia shares fell roughly 17% from their May 14 all-time high of $236.54 within just six weeks. Huang himself characterized the stock’s decline as a “mystery” in public remarks, a choice of words that some market observers have interpreted as reflecting genuine surprise from a chief executive not typically known for expressing uncertainty about his company’s market position.

Nvidia’s current valuation has drawn debate among analysts over whether the recent pullback represents a buying opportunity or a warning sign. At a price-to-earnings-to-growth ratio of roughly 0.44 based on recent analysis, Nvidia trades at a substantial discount on a growth-adjusted basis compared with rival Advanced Micro Devices, which has traded at approximately 97 times forward earnings according to one analysis. That valuation gap has prompted some analysts to argue that Nvidia remains attractively priced relative to its growth prospects, provided the company’s projected earnings growth rate holds up against the mounting headwinds tied to Chinese competition, tightening export controls and cooling AI infrastructure demand.

Wall Street’s overall outlook on Nvidia has remained broadly positive despite the recent volatility. Compiled analyst estimates show an average 12-month price target near $304, with a range spanning from roughly $180 to $500 across dozens of covering analysts, and a consensus rating that remains in buy territory based partly on expectations that AI-related infrastructure demand will continue for years to come.

Investors are now closely watching earnings reports due later this week from Microsoft, Amazon and Meta Platforms, all three of which are expected to announce further increases in AI-related capital spending. Any indication from those companies that spending plans are moderating, rather than continuing to accelerate, could deepen pressure on Nvidia and the broader chip sector, given how heavily current valuations across the industry depend on continued growth in AI infrastructure investment from major cloud computing providers. Conversely, continued signals of robust spending commitments from those companies could help stabilize sentiment toward chipmakers after a turbulent stretch of trading.

The current downturn adds to a year already marked by significant volatility for Nvidia and its semiconductor peers, as investors continue working to reconcile extraordinary underlying financial performance across the AI chip industry with mounting questions about geopolitical risk, competitive pressure from China, and the long-term sustainability of the financing structures increasingly underpinning the sector’s growth.