This has been a forgettable year for Nvidia (NASDAQ: NVDA) investors, as the chip giant's 7% gains pale in comparison to the 58% appreciation in the PHLX Semiconductor Sector index so far this year.
Nvidia's underperformance this year has more to do with investor perception than with its financial performance. The company is on track to clock stronger growth in the current fiscal year, and it has a sizable revenue pipeline that should allow it to sustain solid growth in the future as well. However, investors have been looking at other semiconductor stocks rather than Nvidia to capitalize on the AI chip boom, as evidenced by the stock's poor returns in 2026.
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It is easy to see why that's the case, especially following a report that suggests Meta Platforms (NASDAQ: META), one of Nvidia's key customers, is going big on its in-house chip development efforts.
Reuters reports that Meta Platforms will begin manufacturing an in-house AI chip starting in September. The Magnificent Seven company aims to increase its overall AI compute power to 14 gigawatts (GW) in 2027, relying on an in-house custom AI chip to bolster the AI features powering Instagram and Facebook.
What's worth noting is that the testing of this chip was done in just six weeks, and no major issues were found during this stage. Meta is collaborating with Broadcom to co-design the chip, while foundry giant Taiwan Semiconductor Manufacturing is its manufacturing partner. Moreover, Reuters notes that Meta is planning four generations of in-house processors to support its AI data center infrastructure.
Doing so will allow Meta to design and deploy chips tailor-made to its requirements, thereby reducing computing costs. More importantly, Meta will be able to reduce its dependence on the expensive graphics processing units (GPUs) that it purchases from Nvidia. Meta CEO Mark Zuckerberg noted last year that the social media giant was on track to deploy 1.3 million GPUs by the end of 2025. A significant chunk of them would have been from Nvidia, considering that it controlled an estimated 80% to 90% of the AI chip market until last year.
So, Meta's move to accelerate the deployment of its in-house processors doesn't bode well for Nvidia stock, as it may struggle to emerge from the rut it has been in so far in 2026. Does this mean it is time to start booking profits in Nvidia and look at alternatives to capitalize on the AI chip market's growth? Not necessarily.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
