Have you ever watched a champion boxer take his first real punch to the jaw and wondered if this is finally the moment the reign ends? That’s exactly what the market felt like Tuesday morning when Nvidia – the undisputed heavyweight of the AI chip world – opened down almost 4% in premarket simply because Meta might, just might, buy some of Google’s chips instead.
It wasn’t a knockout blow. More like a stiff jab that reminded everyone this fight has more than one contender.
The Headline That Stopped the AI Party Cold
Let’s be honest – for the past two years Nvidia has been the golden child everyone wanted a piece of. Data center revenue exploding quarter after quarter, margins that would make a Colombian drug lord blush, and a stock chart that looked like it was drawn by someone who only owned green crayons.
Then Tuesday morning a single report from The Information landed: Meta is in talks to spend billions on Google’s TPU chips for its data centers, potentially starting rental arrangements in 2026 and outright purchases in 2027.
That was it. No bankruptcy filing. No supply chain disaster. Just the whisper that one of Nvidia’s biggest customers might diversify.
And the market lost its mind.
How the Market Actually Reacted
By 8:15 a.m. ET you could watch the dominoes fall in real time:
- Nvidia −3.8% premarket (later trimmed to around −2.5%)
- Alphabet +3.2% (pushing dangerously close to a $4 trillion market cap)
- AMD −3% (guilty by association)
- SoftBank −10% in Tokyo (more on that disaster in a minute)
- Even Broadcom and Marvell caught stray bullets
Meanwhile the S&P 500 futures that had been riding high after Monday’s big rally? Flat. Party over.
“Nvidia is the biggest position in my portfolio and I am not worried at all by a 3% dip. It’s healthy that in a functioning market economy Google goes into this market – it just shows its vast potential.”
– Fares Hendi, global fund manager at Prevoir Asset Management
Fair point. But tell that to the traders who just watched $140 billion vanish from Nvidia’s market cap before their first coffee.
Why Google’s TPU Suddenly Matters
For years Google kept its Tensor Processing Units pretty much to itself – an internal secret sauce that powered Search, YouTube recommendations, and increasingly Gemini. The outside world barely noticed because, well, why would you when Nvidia’s GPUs were delivering 90%+ margins and Wall Street was throwing money at anything with “AI” in the pitch deck?
But something changed in 2025. Training the biggest models became less of a bottleneck. Inference – actually running those models on real users – became the new arms race. And inference loves efficiency. It loves custom silicon. It loves chips that sip power instead of chugging it like a frat boy at a kegger.
Enter the TPU v5 and the upcoming v6. Google has been quietly telling anyone who will listen that its latest generation offers dramatically better performance per dollar and per watt on inference workloads than anything Nvidia currently ships.
Meta listening? That’s new. And terrifying for Nvidia shareholders.
SoftBank’s Bloodbath – The OpenAI Connection
While American traders were fixated on Nvidia, Tokyo delivered the real carnage.
SoftBank Group plunged as much as 11% – its worst two-day drop in years – because the market suddenly remembered Masayoshi Son’s entire net worth is basically a leveraged bet on OpenAI. And if Google’s Gemini 3 is actually good (early reviews say it’s scary good), then OpenAI’s moat just developed a few cracks.
One analyst in Tokyo summed it up brutally: “People are waking up to the possibility that the AI leaderboard might reshuffle faster than expected.”
What This Actually Means for Nvidia Investors
Let’s cool the panic for a second.
Even if Meta buys, say, $5 billion of TPUs in 2027, that’s a rounding error compared to the hundreds of billions the hyperscalers are expected to spend on AI infrastructure over the next several years. Nvidia’s order backlog remains absurd. Blackwell is sold out for the next 12 months. The CUDA software moat is still a mile wide and filled with alligators.
But – and this is a big but – the narrative is shifting.
- Training was Nvidia’s kingdom. Everyone agrees GPUs still rule here.
- Inference is suddenly contested territory.
- Custom silicon from Google, Amazon, Microsoft, and now even Meta’s own efforts are gaining ground.
- Power constraints in data centers are real. Efficiency matters more every quarter.
In my view? This is the first genuine competition Nvidia has faced since the AI boom began. And competition, even if it only takes 10-15% of the market, changes valuation multiples dramatically when your stock trades at 35× forward earnings.
The Broader Market Context
Stepping back, Tuesday wasn’t just about chips.
Geopolitical hope around Ukraine flickered again (oil actually fell on peace talk rumors), the Fed cut odds climbed back toward 75% for December, and we’re about to get a flood of delayed economic data that might as well be written in hieroglyphics given how old it is.
But make no mistake – the AI complex remains the sun around which everything else orbits. When Nvidia catches a cold, the entire tech sector reaches for tissues.
Where We Go From Here
Three scenarios seem plausible:
- Nothing-burger – Meta tests some TPUs, finds them lacking for its specific workloads, and Nvidia’s dominance continues unabated.
- Slow erosion – Hyperscalers gradually shift 20-30% of inference spend to custom silicon over 3-5 years. Nvidia grows slower than expected but still grows.
- Real competition – Google perfects external TPU sales, Amazon’s Trainium/Inferentia gain traction, and suddenly the $200 billion+ annual AI chip market has multiple viable players.
Most Wall Street analysts are still in camp #1 or #2. The valuation on Nvidia assumes camp #1 forever.
Me? I moved Nvidia from my largest position to my third-largest this morning. Not because I think the story is broken, but because the risk/reward at 35× earnings with emerging competition feels different than it did at 25× earnings six months ago.
Sometimes the market’s first reaction is the right one. Tuesday felt like one of those times.
The AI revolution is still very much underway. But for the first time in years, Nvidia might have to share the throne.
And sharing has never been Wall Street’s strong suit.
