The mystery of Nvidia’s underperforming stock

Nvidia may be the biggest name in the artificial-intelligence boom, but the stock has lagged behind peers over the past few months.

“Since ChatGPT was released on November 30, 2022, it’s hard to find a stronger performer than Nvidia," Bespoke Investment Group wrote on Wednesday. The market research group noted that Nvidia shares were up 982% from that date through their record close on Aug. 12.

However, Nvidia’s footing has looked increasingly shaky, especially relative to other AI-linked stocks. A basket of stocks including foundry partner Taiwan Semiconductor Manufacturing, data-storage company Seagate Technology, and memory-chip maker Micron has gained 68.2% since Oct. 31, 2024; Nvidia has gained just 28.3% since then.

The underperformance is evident even when comparing Nvidia to other stocks, not just chip makers. Bespoke’s “Picks & Shovels" basket, which includes energy and data-center infrastructure stocks like Constellation Energy, Vistra, NRG Energy, and Quanta Services has gained nearly 61% since Oct. 31—more than twice as much as Nvidia.

The latest leg of the performance gap was kicked off by earnings from Oracle earlier this month, Bespoke noted. It revealed a significant increase in Oracle’s backlog for contracted work.

“We don’t have a strong thesis as to why NVDA has been such a relative underperformer over the past month," the research group admitted. Investor expectations were high, but Nvidia’s second-quarter earnings report was far from a bust. Adjusted earnings, revenue, and third-quarter revenue guidance all came in above expectations.

One might think the company’s troubles in China are spooking investors. Nvidia and rival Advanced Micro Devices agreed last month to give the Trump administration a 15% cut of their AI-chip sales in the country. Then, on Wednesday, a report suggested Chinese companies had been banned from purchasing Nvidia’s semiconductors.

But the stock actually inched up following confirmation from the White House in August. And even though shares tumbled on Wednesday, closing down 2.6%, they bounced back on Thursday.

Even if Chinese sales are challenged, “other buyers appear to be as desperate as ever to get their hands on NVDA GPUs," Bespoke added.

The market for GPUs, however, may not be as strong as it once was. Bespoke notes that the cost to rent GPU’s has been declining, and a look at the Silicon Data H100 Rental Index, which tracks the hourly cost of renting a graphics processing unit, suggests that is accurate. The index climbed to $2.89 an hour in mid-April, but was down to $2.41 one month later, before slipping to $2.15 on Thursday.

“Part of that is thanks to the introduction of their Blackwell line, which is generally more efficient, but it remains the case that data centers are chasing falling prices for a given level of capacity," Bespoke added.

It’s difficult to predict where Nvidia will go next—and the stock isn’t falling, just lagging. In fact, the concerns may be much ado about nothing. But the market has a way of sniffing out problems before investors do, creating something of a quandry.

“It wouldn’t be the first time that a secular winner faces a narrative test before continuing to surge if that ends up playing out," Bespoke wrote. “But we are somewhat surprised at how little attention the underperformance of the largest listed U.S. stock is getting, especially relative to other adjacent names."

And now investors have to make sense of Nvidia’s partnership with Intel to co-develop chips for data centers and personal computers, an announcement that sent shares up 3.5% on Thursday.

It’s almost enough to make one give up on AI altogether.