The AI darlings are slipping. That could be bad for Nvidia.
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Wall Street's AI hopium is turning to discernment, with investors punishing Oracle and Broadcom for less-than-stellar earnings this week, bringing Nvidia down alongside them.
Why it matters: It represents a shift in the AI investment thesis: Investors are set to reward efficiency, not spending, in 2026. That could be a big problem for Nvidia, which benefits from record spending from a handful of Big Tech customers.
What they're saying: If 2026 is the year when investors reward efficient spending, "that certainly would be bad" for Nvidia, Mandeep Singh of Bloomberg Intelligence tells Axios.
- Oracle is seen as Exhibit A for inefficient spending within the AI elite class, while Google as seen as the North Star.
- "The market is discerning and telling you that Google is doing much better in capex efficiency than an Oracle," Singh says.
Driving the news: In early afternoon trading on Friday, Oracle shares were down more than 4% after tumbling on Thursday, while Broadcom was down more than 10%. Nvidia shares were off nearly 2%.
Threat level: As executives see this turn in Wall Street's reward mechanism toward efficiency versus spending, they may shift to more budget-conscious models.
- "If OpenAI and Oracle get scrutinized in terms of their investments, how does that affect Nvidia?" Singh says.
- "To my mind, that's why Nvidia may remain under pressure."
By the numbers: With $90 billion in capex, Google was able to train Gemini 3, accelerate its cloud business and service generative AI into its search.
- That capex represents a quarter of Google's revenue.
- In contrast, Oracle reported a capex plan of $50 billion for the year. Its total revenue for fiscal year 2025 is just over $57 billion.
- Meta, meanwhile, is set to spend over $70 billion this year, which makes up nearly half of its revenue.
The bottom line: 2026 may be the year investors seek a return to fundamentals that historically define prices on Wall Street: Revenue. Debt. Earnings. You know, the boring stuff.
- A return to boring may be healthy for the market, but it would take the air out of Nvidia's stock, whose rise has made it the most valuable company in the world.
Yes, but: Any selloff tied to AI helps quell the bubble concerns.
- "I'm hesitant to call it a bubble in any way because every time a name has even disappointed slightly the reaction has been some sort of correction which is very healthy," Singh adds.
