Why Citi Sees NVIDIA (NVDA) Facing Growing Pressure From Broadcom and Google

Citi reiterated a "Buy" rating on NVIDIA but lowered its price target to $200 from $210, citing increased competition threatening the company's AI chip "moat." The firm highlighted Broadcom's robust growth, including a $10 billion custom AI chip order, and Google's increasingly competitive Tensor Processing Units (TPUs) as factors expected to reduce NVIDIA's 2026 GPU sales by an estimated $12 billion, or approximately 4% lower than previous forecasts. This indicates a potential shift in the AI chip market dynamics with intensified rivalry impacting NVIDIA's future revenue projections.

Analysis

Citi has reiterated its 'Buy' rating for NVIDIA but trimmed its price target to $200 from $210, signaling concerns over a potential erosion of the company's AI chip 'moat'. The revision is driven by intensifying competition, primarily from Broadcom and Google. Citi highlighted Broadcom's robust year-over-year growth, underscored by a significant $10 billion order for its custom AI chips, or XPUs. Simultaneously, Google's increasingly competitive Tensor Processing Units (TPUs) are identified as a growing direct threat to NVIDIA's GPU sales. This competitive pressure has led Citi to revise its 2026 GPU sales forecast for NVIDIA downward by approximately 4%, equating to an estimated $12 billion revenue impact. The risk is further accelerated by strategic shifts, such as Google offering its compute capacity to NVIDIA's key customers like Meta and Oracle, which Citi views as a move that indirectly competes with NVIDIA and could speed up the adoption of alternative AI chips.

Key Decisions for Investors

• Investors holding NVIDIA should closely monitor competitive developments from Broadcom and Google, as the erosion of its market dominance could pressure future growth rates and margins.
• Consider evaluating positions in key competitors like Broadcom (AVGO), which is demonstrating significant momentum in the custom AI chip space with substantial new orders and strong growth.
• It is prudent to reassess long-term valuation models for NVIDIA, factoring in a higher probability of a more competitive and fragmented AI accelerator market by 2026 than previously anticipated.