Is Nvidia Stock at Risk Amid Rumors That OpenAI Will Delay Its IPO?

Key Insights

• Nvidia stock has slumped, and this weakness may persist amid fears that OpenAI will delay its IPO.
• Nvidia has recently become one of the company’s biggest investors.
• OpenAI unveiled its chip, which is manufactured by Broadcom, on Thursday.

Nvidia stock price has slumped in the past few weeks. It is about to move to a bear market after falling by 19% from the year-to-date high. This retreat may continue in the foreseeable future amid rumors that OpenAI may delay its Initial Public Offering (IPO).

OpenAI May Delay Its IPO

Nvidia shares have come under pressure amid the ongoing woes in the IPO market. There, SpaceX stock has slumped by over 32% from its highest point this month, erasing billions of dollars in value.

Other recent IPOs like Cerebras and Klarna have continued their downward trend as the momentum wanes. It is against this backdrop that OpenAI is considering delaying its IPO to next year.

According to the New York Times, Sam Altman is pushing advisors to ensure that the company’s valuation jumps to $1 trillion. It was recently valued at $750 billion in a round that Nvidia participated in.

Advisors are concerned that the current state of OpenAI is not all that good to justify the $1 trillion valuation. For one, the company is already burning billions of dollars as it boosts its data center investments.

It is also making substantial losses, while its revenue growth has stalled amid rising competition with Anthropic and other tools.

Therefore, there is a likelihood that the company will attract a lower valuation than expected. Alternatively, as we see with other IPOs, the initial jumps don’t always hold.

The ongoing developments at OpenAI are important for Nvidia for two main reasons. If the stock’s performance is not all that strong, the value of its holdings will be much lower than expected. These fears explain why Softbank stock plunged by double digits in Japan.

At the same time, there is a risk that OpenAI will reduce its capital spending, a move that will hurt Nvidia. In the past few years, OpenAI has made deals worth billions of dollars, and a cut in spending will impact its performance.

OpenAI Has Launched its Custom Chip

The Nvidia stock price is also at risk after OpenAI and Broadcom unveiled the custom chip that they promised would be faster, more reliable, and accessible to more people.

OpenAI designed this chip based on its requirements and handed it to Broadcom for manufacturing. In a statement, Sam Altman said that Jalapeno, the chip, was showing strong promise in terms of its performance.

It is unclear whether OpenAI will start replacing Nvidia’s GPUs for its data centers. It’s a move that will save it money in the long term. This would affect Nvidia’s growth in the long term as other companies like Google, Microsoft and Amazon have continued to create their own GPUs.

Still, there are two main potential catalysts for Nvidia stock amid the ongoing challenges. The most important one is that its revenue is expected to continue growing this year as the AI boom accelerates. Just this week, Micron said that its revenue surged by over 300% in the third quarter.

The other catalyst is that Nvidia is highly undervalued and is now trading as a value stock despite its strong revenue growth. It has a price-to-earnings ratio of 22, lower than the S&P 500 Index average of 23.

Nvidia Stock Price Technical Analysis

The daily chart shows that the NVDA shares have continued falling in the past few months. It has slumped from a high of $236 to the current $195. It has formed a descending channel and is now near the lower side. This channel is a sign that it has formed a bullish flag pattern.

The stock has also remained above the 200-day moving average. Historically, this average has provided it with substantial support.

Therefore, there is a likelihood that it will rebound in the coming months, with the initial target being at $235. A surge above that price will raise the possibility of the stock hitting $300.

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