Nvidia's AI Chip Momentum May Be Cooling, Microsoft CEO Hints

Nvidia's stock is facing growing headwinds as Microsoft CEO Satya Nadella suggested that the frenzied demand for AI chips may be easing, reports Business Insider. The comments, made in an interview with Bill Gurley and Brad Gerstner of the B2 podcast, have intensified a sell-off in Nvidia shares, pushing the company closer to bear market territory.

Nvidia's stock has already dropped 17% since its record high in November, bringing it close to a 20% decline, which is often used to define a bear market. The sell-off accelerated after Nadella's remarks signaled a potential shift in the AI chip market.

When asked if Microsoft was still facing supply constraints in its AI technology buildout, Nadella replied, "I am power [constrained], yes, I'm not chip supply constrained." He added, "We were definitely constrained in '24. What we have told the street is that's why we are optimistic about the first half of '25 which is the rest of our fiscal year. And then after that I think we'll be in better shape going into 2026 and so we have good line of sight."

These comments, coming from a major Nvidia customer reportedly representing around 20% of its revenue, suggest that the previous supply-demand imbalance in the AI chip market, where Nvidia struggled to meet the overwhelming demand, may be starting to shift.

The past two years have seen Nvidia's GPUs in high demand, with companies aggressively investing in building their own large language models. This led to a situation where Nvidia had to prioritize chip allocations, with reports of prominent tech leaders pleading for more chips from CEO Jensen Huang.

While Nadella's statements do not necessarily indicate a decline in overall demand for Nvidia's core GPU products, they do suggest that supply is catching up in certain areas. This contradicts the widely held sentiment on Wall Street that Nvidia's next-generation Blackwell GPU chips are already facing at least a year-long backlog.

Nadella's comments have nevertheless dampened some of the most bullish views on Nvidia's growth prospects, which had previously been fueled by the narrative of persistent supply constraints and overwhelming demand.