Analysts report that Nvidia is underperforming as semiconductor companies broadly surge, citing competitive and market saturation pressures.

Chip stocks are surging at a historic rate, but Nvidia, the company at the heart of the AI boom, has not participated in the rally. Over the past month, AMD and Micron have each surged 90% and 76%, respectively, while Nvidia is up only 17%. Since April 27, just before major chip companies began reporting earnings, the divergence has widened. Intel and Micron have popped more than 30% during that period, AMD has risen around 20%, while Nvidia has remained flat.

First-quarter earnings revealed a bottleneck in memory chips alongside progress among hyperscalers in developing their own in-house chip systems, such as Alphabet's TPUs and Amazon's Trainium chips. A key concern is that capex spending cannot get much higher, and Nvidia shares were already pricing in a best-case scenario. Venu Krishna, head of U.S. equity strategy at Barclays, told CNBC on Wednesday, "Within the semiconductor space, the large-cap AI bellwethers, which include Nvidia, are unfairly pricing a peak in capex, which is not in sight, certainly for the next [two to] three years. If anything, capex numbers are going up." Krishna added that "The Street was materially too low in calendar year 2027 and 2028."

Hyperscalers have boosted capex projections for 2026 significantly: Alphabet's forecast increased 4% to $185 billion; Amazon increased it 1% to $200 billion; Meta increased it 8% to $135 billion; and Microsoft increased it 24% to $190 billion. Both Evercore and Bank of America project 2027 capex will exceed $1 trillion. Nvidia spent $6.1 billion on capex during fiscal 2026 and expects to increase capital expenditures in fiscal year 2027. However, valuation concerns persist. With a forward enterprise value to EBITDA ratio of 18.23, analysts note a mismatch: Nvidia trades at around 20 times earnings while growth projections are 60% to 70%. Goldman Sachs maintains a buy rating with a $250 12-month price target based on a 30 times price-to-earnings multiple, citing "significantly more headroom for increased capex."

Competition is intensifying as hyperscalers develop in-house alternatives. Amazon's Trainium chips and Alphabet's TPUs have caught Wall Street's attention, with speculation surrounding Marvell building AI-related chips for Google. Mizuho analyst Lloyd Walmsley assumes Google could generate approximately $61 billion in TPU sales across 2026 and 2027 combined, at Cloud segment margins of 32.4% and 38.0%. Memory chip shortages have also boosted AMD and Intel, widening the gap with Nvidia. Nevertheless, UBS analyst Timothy Arcuri noted that "NVDA has built a formidable moat for new compute-intensive workloads in the data center and could ultimately leverage its GPU architecture to more broadly displace INTC," though new CPUs from AMD "present a threat that we could be underestimating."