Nvidia stock is in the red, back below $200: can it rebound?

Shares of Nvidia declined in early trading on Friday, slipping below the closely watched $200 level after a sharp drop in the previous session.

The move comes as investor concerns about rising competition overshadow strong demand signals from artificial intelligence spending.

The stock initially rose 1.4% to $202.08 before reversing course to trade 1.1% lower at $197.42.

At the time of writing, the Nvidia stock was down around 0.3%.

The move followed a 4.6% decline on Thursday that pushed shares below the $200 threshold — a level that has served as a key technical marker for investors.

Nvidia has only managed to sustain levels above $200 during two brief periods — late October to early November 2025 and again in mid-to-late April.

The latest drop has renewed concerns that the stock could remain below that level for an extended period, making near-term price action particularly significant.

Strong AI spending signals persist

Despite the decline, the broader demand outlook for Nvidia’s products remains robust, supported by rising capital expenditure commitments from major technology companies.

Meta Platforms raised its 2026 capital expenditure outlook by $10 billion to between $125 billion and $145 billion, while Alphabet increased its guidance by $5 billion to as much as $190 billion.

Microsoft said it expects fourth-quarter capital expenditure to exceed $40 billion and forecast total annual spending of about $190 billion.

Combined with Amazon’s plans, the four hyperscalers are projected to spend up to $725 billion in 2026.

Nvidia remains a central beneficiary of this spending, capturing an estimated 90% of AI accelerator demand.

Alphabet's challenge

Investor sentiment, however, has been tempered by increasing focus on in-house chip development by large technology firms.

Alphabet highlighted growing demand for its Tensor Processing Units (TPUs), which are positioned as alternatives to third-party GPUs.

The company also said it plans to sell TPUs directly to select customers, expanding their commercial reach.

While custom chips are generally less powerful than Nvidia’s high-end GPUs, they offer cost advantages for specific applications and could reduce reliance on external suppliers over time.

The competitive narrative has been reinforced by the strong performance of Alphabet, whose shares surged 10% on Thursday, lifting its market capitalisation to over $4.65 trillion and bringing it closer to Nvidia’s valuation.

Nvidia, currently valued at under $4.8 trillion, has fallen more than 6% over the past two sessions following reports that OpenAI missed internal revenue and growth targets, raising questions about demand visibility.

Defense deals highlight strategic role

At the same time, Nvidia continues to expand its strategic footprint through government partnerships.

The company is among several firms — including Microsoft and Amazon — that have entered into agreements with the US Department of Defense for expanded use of advanced AI tools on classified networks.

According to a Defense Department statement, the agreements allow for “lawful operational use” of AI technologies and are aimed at accelerating the transformation of the US military into an “AI-first” force.