Nvidia (NVDA) Stock Drops After Oracle Selects AMD as Chip Partner

TLDR

• Nvidia stock dropped 4.4% on Tuesday as Oracle announced a partnership with AMD to deploy 50,000 AI processors starting in Q3 2026, raising competition concerns
• The company invested $2 billion in Elon Musk’s xAI venture and will supply GPUs for the Colossus 2 data center, potentially scaling to 200,000 Blackwell GPUs
• U.S. Commerce Department approved export licenses allowing Nvidia to sell up to 500,000 advanced AI chips annually to the UAE, opening a new revenue stream worth billions
• Nvidia launched the DGX Spark, a compact AI supercomputer with GB10 Grace Blackwell superchip, targeting smaller developers and expanding beyond hyperscaler customers
• The company posted trailing twelve-month revenue of $165.2 billion with 52.4% profit margins, while analysts at Cantor Fitzgerald raised their price target to $300 per share

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Nvidia Corporation shares closed down 4.4% at $180.03 on Tuesday as investors digested news about intensifying competition in the AI chip market. The decline came despite the company announcing several growth initiatives.

The stock had risen 2.8% on Monday before Tuesday’s retreat. Nvidia’s market capitalization currently stands at $4.47 trillion.

Oracle sparked concerns about market share shifts when it announced a partnership with AMD for AI infrastructure. The cloud computing company will be the launch partner for AMD’s new Instinct MI450 processors.

The deal calls for deploying 50,000 chips starting in the third quarter of 2026. This marks AMD’s first rack-scale, 72-processor AI server offering.

AMD shares gained 0.8% on the news. Broadcom fell 3.5% after jumping nearly 10% the previous day on its own OpenAI partnership announcement.

Melius Research analyst Ben Reitzes wrote that the growing demand for compute power should drive increased capital spending across the industry. He believes Broadcom, Nvidia, and AMD can all benefit from the expansion.

xAI Investment Secures Long-Term Demand

CEO Jensen Huang confirmed Nvidia invested roughly $2 billion in Elon Musk’s xAI startup. The deal goes beyond a simple equity investment.

Nvidia will supply and retain ownership of GPUs deployed in xAI’s upcoming Colossus 2 data center. Musk’s team plans to raise up to $20 billion to fund expansion to 200,000 Nvidia Blackwell GPUs.

The arrangement guarantees long-term GPU demand from xAI. Huang described Musk as a “visionary partner” and said he wished he “had given him more money.”

The financial exposure represents just 2% of Nvidia’s quarterly revenue. The company maintains a cash position of $56.8 billion.

The partnership also provides visibility across Musk’s ecosystem of ventures. This includes xAI, Tesla, and X (formerly Twitter).

UAE Export Approval Opens New Market

The U.S. Commerce Department granted export licenses for Nvidia to sell advanced AI chips to the United Arab Emirates. The authorization permits up to 500,000 GPUs annually.

The approval covers H100 and Blackwell-class processors previously restricted under export controls. About one-fifth of the units will go to Abu Dhabi-based G42.

The deal unlocks a new revenue stream valued in the billions. Industry sources estimate sales to the region could boost annual revenue by several percentage points.

The arrangement ties Gulf AI infrastructure directly to U.S. technology. Nvidia is participating in the newly launched “Live Intelligence” platform in the GCC region.

Nvidia’s trailing twelve-month revenue reached $165.2 billion, more than double the $60.9 billion recorded in fiscal 2024. Net income surged to $86.6 billion, representing a 52.4% profit margin.

Data center sales contributed over $108 billion of total revenue last year. Q2 FY2026 alone delivered $46.7 billion, up 78% year-over-year.

Gross margins stood at 69.8%. Operating margins remain near 61%.

The company generated $77 billion in operating cash flow over the past year. It maintains a low 10.6% debt-to-equity ratio.

Return on equity exceeds 109%. Buybacks continue to reduce share count by roughly 2% per year.

Nvidia trades at a trailing P/E of 53.8. Wall Street’s consensus 12-month target sits around $216, while top-end estimates reach $300.

Cantor Fitzgerald recently reaffirmed its Overweight rating with a $300 price target. The firm cited the company’s AI leadership and multi-year scaling opportunity.

Analysts expect FY2026 revenue to climb 58% to $206.6 billion. FY2027 is projected to see another 33% increase.

EPS is projected to rise from $4.51 this year to $6.38 next year. The PEG ratio of 1.0 suggests earnings growth aligns with price expansion.

Rivals including Broadcom, AMD, and hyperscalers are developing in-house AI chips. Gartner predicts that by 2027, up to 40% of AI workloads may shift to custom silicon.

U.S. export restrictions continue to impact sales in China. Management estimates an $8 to $11 billion annual impact from these limitations.

Tuesday’s decline followed renewed trade tensions. China’s transport ministry criticized a U.S. probe into shipping firms.

Nvidia unveiled the DGX Spark, described as the world’s smallest AI supercomputer. The system is designed to give developers access to local AI computing power.

The Spark features the new GB10 Grace Blackwell superchip and ConnectX-7 networking. It can scale up to 128GB of memory and connect to other systems for workloads exceeding 400 billion parameters.

The first Spark systems were delivered personally to Elon Musk. Nvidia positions the product as an entry point for smaller developers.

The company is set to report fiscal Q3 earnings on November 19. Investors will watch whether Nvidia can maintain revenue growth above 50% and gross margins near 70%.