Nvidia Stock Falls 12% as Gartner Flags $3.5T in AI Risks

Nvidia stock extended its October correction as investors questioned the financial returns on artificial intelligence infrastructure investments. Shares closed at $214.13 on Oct. 16, approximately 12% below their Oct. 6 high of $243.37.

The decline followed mounting concerns about borrowing costs, data center spending, and future AI revenue growth. Gartner’s latest research warned that trillions of dollars in infrastructure investment could face impairment exposure.

However, Nvidia’s latest financial results continued showing substantial revenue expansion. The question is whether future customer spending can sustain that growth.

Nvidia Stock Falls as AI Infrastructure Concerns Increase

There are signs that the AI bubble is continuing, which may burst soon. The closely watched AI Bubble Index jumped to the elevated risk level of 74, and is closely moving closer to the extreme level of 80.

This index examines several key metrics in the AI industry. It looks at the attention intensity, revenue uncertainty, funding hype, valuation pressure, infrastructure intensity, and market concentration.

The valuation pressure metric, which carries a 25% weighting, measures how far public and private valuations have moved ahead of fundamentals. This metric is one of the lowest since most AI companies are not all that overvalued. Nvidia trades with a forward price-to-earnings ratio of 24, much lower than the five-year average of 45.

The attention intensity, which measures media and search attention, has jumped to 100 as many platforms are discussing AI. Revenue uncertainty is at 72/100, while infrastructure intensity has moved to 90.

With the index rising, there are concerns that the AI bubble will burst. Ray Dalio, the billionaire founder of Bridgewater Associates, has warned that the bubble may burst soon. He pointed to the rising interest rates and bond yields. The Fed has hiked rates to 4%, while the ten-year is hovering near its highest point in nearly two decades.

Other analysts, including Michael Burry, has warned that the AI bubble will burst, citing the robust spending and the revenue visibility. OpenAI’s annualized revenue was $20 billion lower than expected. Similarly, while Anthropic’s revenue growth continued, its momentum was slower than expected.

Nvidia Would be Highly Impacted If the AI Bubble Bursts

Jensen Huang’s Nvidia would be one of the most affected companies if the AI bubble bursts. That’s because its GPUs power the most advanced models today, so demand would fade.

At the same time, Nvidia’s tentacles have spread far and wide. It has invested billions of dollars in all areas of the AI space. For example, it is one of the top investors in OpenAI and Anthropic.

The company has also invested in neocloud companies like CoreWeave, Nebius, and IREN. In a recent report, Gartner warned that these neocloud companies will need to have billions of dollars in impairments by the end of 2030.

Nvidia has also invested in companies in the optics industry like Lumentum and Coherent. It also invested in other chipmakers like Intel and Marvell. As such, a change of fortunes in the AI space will impact its growth.

On the positive side, many analysts believe Nvidia stock has further upside. The average estimate is that its stock will ultimately reach $250 or higher.

Nvidia Stock Price Analysis: Could NVDA Test $200?

Nvidia stock remains under pressure after retreating from its October high. The decline has brought shares closer to the $210 region following several sessions of selling.

That level represents a nearby psychological support reference. A sustained break below $210 could bring the $200 region into focus.

The $200 level also appeared in earlier bearish technical analysis that identified a possible rising wedge formation.

A rising wedge develops when ascending trendlines converge and upward price momentum begins weakening.

However, the formation requires a confirmed breakdown before it can support a bearish reversal interpretation.

The stock’s recent correction is consistent with weaker short-term momentum, but it does not guarantee further losses.

The Relative Strength Index and MACD can provide additional evidence of momentum changes.

Nevertheless, neither indicator independently establishes the timing or extent of a possible decline.

On the upside, $220 represents a nearby recovery reference. A sustained move above that region could bring $230 back into focus. Further gains would be needed to challenge the October high near $243.

The next trading sessions will help determine whether the decline continues or buyers establish support.

What Comes Next for Nvidia Stock?

Nvidia stock faces two competing developments following its October correction. Gartner’s report highlights the financial risks associated with rapid AI infrastructure expansion.

Meanwhile, Nvidia’s latest quarterly results demonstrate continued demand and substantial profitability.

The central issue is whether customers can generate sufficient returns to maintain their capital expenditure commitments.

Investors will monitor financing conditions, infrastructure utilization, and spending guidance from major technology companies.

Technically, continued weakness below $210 could bring $200 into focus. A recovery above $220 and $230 would weaken the immediate bearish outlook.

For now, the correction reflects concerns about future AI investment returns rather than a confirmed contraction in Nvidia’s latest reported business.

This article is for informational purposes only and does not constitute financial or investment advice. Stocks are volatile, and investors may lose capital. Readers should conduct independent research and consult a qualified financial adviser before making investment decisions.