NVDA: A Victim of Its Own Success

People wondering today why AVGO spiked but isn’t helping NVDA. In fact, there are now (idiotic) rumors that AVGO’s business booming is bad for NVDA. Just so you guys are aware, Broadcom competes with Mavel in specialized custom GPU chips (which cost, say $400-500 million a chip). NVDA competes with AMD (although AMD is like miles behind) in non-specialized GPU chips which come with software (CUDA), development assistance etc for companies.

NVDA and Broadcom DO NOT directly compete. Broadcom is NOT a threat to NVDA’s business. However, NVDA can be a huge threat to Broadcom. If NVDA tells big tech they will produce custom chips for them, Broadcom’s business will take a MASSIVE hit. Broadcom cannot compete with NVDA or even AMD in the non-specialized GPU chips section because there’s a software lock in, logistics base etc that NVDA has already developed.

Now, why is NVDA stock getting destroyed? Because it became too popular, and now trades so purely on swings in the market due to lots of retail traders etc, that good news barely moves it etc. There’s very little correlation. Expectations to NVDA now are so sky high—the expectation is that NVDA will always beat, so it’s hard for the stock to blow away expectations anymore. Compare that with Broadcom, which isn’t the most popular AI name (i.e. NVDA). That keeps overall sentiment much more tame for AVGO allowing it to blow out even though the quarter was mixed.

If news came out tomorrow that Blackwell is selling like hot cakes, stock still wouldn’t move on it. NVDA’s stock has become a victim of its own success—of its popularity. When I invested in the stock in 2018, it acted much more rationally than the stock price does nowadays.