Nvidia Faces Competitive Pressure as Google Seeks to Sell AI Chips Directly

Nvidia shares declined 2.6% Tuesday amid reports of Google's potential entry as a direct competitor in the AI chip market. The tech giant is negotiating a multibillion-dollar deal with Meta to supply tensor processing units (TPUs) starting in 2027, potentially capturing up to 10% of Nvidia's annual revenue.

Nvidia responded to the competitive threat by asserting its GPUs remain "a generation ahead of the industry" and offer superior flexibility compared to Google's custom chips. This development comes as major cloud providers including Amazon, Microsoft, and Google increasingly develop their own AI accelerators, creating both partnership and competition dynamics with Nvidia.

The AI chip market continues to evolve rapidly, with Nvidia's dominance facing challenges from custom silicon solutions. Tuesday's stock movement erased Monday's gains, reflecting ongoing investor concerns about valuation pressures in the AI sector and shifting competitive landscapes.