Nvidia (NVDA) shares edged lower on Thursday, falling 1.1% to $201.76 in midday trading, even as the broader semiconductor sector rallied. The VanEck Semiconductor ETF (SMH) gained 3%, while the Nasdaq Composite rose 0.9%, the S&P 500 added 0.7%, and the Dow Jones Industrial Average climbed 223 points (0.4%).
The divergence highlights a persistent rotation among investors away from Nvidia and toward other parts of the artificial intelligence supply chain, particularly memory and storage companies. Micron Technology surged 7%, and Sandisk gained 7%, while several other chip names also advanced.
Catalysts: China Report and SpaceX
Wednesday's rally was partly fueled by a report from The Information that Beijing may allow Chinese companies to purchase some of Nvidia's H200 AI chips. If implemented, the policy shift could restore a portion of Nvidia's access to the Chinese market, which was sharply curtailed by U.S. export restrictions.
Another catalyst came late Wednesday when Elon Musk's SpaceX announced its Grok 4.5 AI model, trained using “tens of thousands” of Nvidia's latest GB300 graphics processing units. If Grok 4.5 proves competitive against models from Anthropic and OpenAI, it could reinforce Nvidia's leadership in AI computing ahead of the broader rollout of its next-generation Vera Rubin platform, expected in the second half of the year.
Rotation Weighs on Nvidia's Relative Performance
Despite these positive developments, Nvidia has struggled to keep pace with many semiconductor peers in 2026. After surging more than 1,100% between late 2022 and the end of 2025, the stock has gained only about 7.6% year-to-date. In comparison, the S&P 500 is up 9.6%, the Nasdaq 100 has risen 16%, and the Philadelphia Semiconductor Index has soared 74%.
The underperformance reflects a broader rotation within the AI trade rather than a deterioration in Nvidia's business fundamentals. Investors have increasingly shifted toward memory manufacturers, storage companies, and other semiconductor firms expected to benefit from expanding AI infrastructure spending. Micron Technology has been a prime beneficiary as demand and pricing for high-bandwidth memory chips strengthen. Meanwhile, rivals such as Advanced Micro Devices and Intel have also significantly outperformed Nvidia this year. For more on this trend, see Intel and AMD Surge Past Nvidia in H1 2026: Can the Momentum Last Into H2?
The rotation has pushed Nvidia's forward price-to-earnings ratio to around 18 times projected earnings over the next 12 months, its lowest valuation since before the AI boom began, according to Bloomberg data. This compression comes even as Wall Street analysts continue to raise earnings estimates, suggesting that investor caution is driven more by shifting market preferences than weakening business performance.
TD Cowen Sees Durable AI Demand
TD Cowen reiterated its Buy rating and $275 price target on Nvidia following meetings with CEO Jensen Huang, CFO Colette Kress, and Head of Investor Relations Toshiya Hari. The brokerage also maintained Nvidia as one of its top investment ideas.
According to TD Cowen, Nvidia executives emphasized that demand for AI computing capacity continues to exceed available supply. The firm pointed to rising rental prices for legacy GPUs, expanding enterprise AI adoption, and recently signed cloud agreements at premium pricing as evidence that compute capacity remains constrained. TD Cowen also argued that Nvidia's opportunity extends beyond graphics processors, with its combination of hardware and software positioning it to benefit from the continued buildout of AI infrastructure. For a deeper look at the competitive landscape, see Nvidia's AI Chip Dominance Faces Growing Threat from Startups and Big Tech Rivals.
As the AI trade broadens, Nvidia's lower valuation and strong demand backdrop present a contrasting picture. Investors will be watching for signs of whether the rotation is temporary or signals a longer-term shift in market leadership. For more on the rotation dynamics, see Nvidia Lags Chip Rally as Kyber Delay, Rotation to Broader AI Spending Weigh.
This article is for informational purposes only and does not constitute financial advice.
