Nvidia's stock slipped further in early Wednesday trading, extending losses triggered by investor doubts about the sustainability of artificial intelligence spending. The chipmaker's market value shrank by nearly $238 billion over just two sessions, reflecting growing skepticism about whether the surge in AI demand justifies its lofty valuation.

After closing Tuesday at $197.01, Nvidia remained around 4.75% below last Friday's closing price. Despite this sharp drop, the company still commands a market capitalization near $4.77 trillion, with a price-to-earnings ratio above 30. Yet, the recent plunge represents almost five times Nvidia's latest quarterly operating cash flow, raising alarms over whether tech giants’ AI budgets will translate into real profits.

Cloud Demand Under Scrutiny

While Nvidia’s Data Center segment accounted for $75.2 billion of its $81.6 billion first-quarter revenue, investor attention has shifted to how much cloud providers will continue investing. Amazon, Microsoft, and Meta are closely watched this week as they release earnings reports that will reveal their AI-related spending and revenue growth. Their results could either reassure the market or deepen concerns about whether AI infrastructure investments will yield enough returns.

Forecasts and Supplier Warnings Add Pressure

Nvidia projects roughly $91 billion in revenue for the second quarter, excluding sales to China’s data center market. CEO Jensen Huang noted that AI-factory developments are accelerating rapidly, but some suppliers like SK hynix have reported disappointing earnings, adding pressure on Nvidia’s stock. The overall mood remains cautious as investors weigh the balance between solid demand for AI chips and the financial realities cloud companies face.

Coinbase and Robinhood’s upcoming earnings also contribute to a broader tech market atmosphere focused on growth versus profitability. Nvidia’s near-term performance will likely hinge on how cloud spending evolves against these financial backdrops.

This content is for informational purposes only and does not constitute financial advice.