Nvidia (NASDAQ: NVDA) recently announced another outstanding quarter, NVDA stock declined as reports surfaced that Elon Musk's massive AI chip orders for xAI are straining the company's supply chain.

Exceeding expectations has become routine for Nvidia, thanks to the ongoing growth in AI capital spending. Analysts had anticipated another strong quarter, and Nvidia's stock already reflects significant future success. However, despite some very optimistic remarks from CEO Jensen Huang during the earnings conference call, Nvidia shares have declined by about 7% since the release of the fiscal third-quarter report.
 

The Real AI Future

During the earnings call on November 20, CEO Jensen Huang addressed concerns regarding manufacturing and quality issues related to Nvidia's latest Blackwell AI architecture. The success of Blackwell is crucial for Nvidia as it approaches the upcoming year, and Huang shared encouraging news:

"Production of Blackwell is running at full capacity. In fact, we will deliver more Blackwells this quarter than we had originally estimated. Demand is exceeding our supply."

At an AI summit in Japan with SoftBank CEO Masayoshi Son the previous week, Huang outlined his vision for the widespread impact he expects Blackwell and Nvidia's other AI platforms to have.

Huang and Son share a longstanding relationship, and during their discussion, Huang humorously mentioned that Son "wanted to lend me money to buy Nvidia—all of it." He added, "Now I regret not taking you up on that. That was a great idea." Son recalled that this offer was made in 2016, shortly after SoftBank acquired semiconductor chip designer Arm Holdings for $32 billion. SoftBank still retains 90% ownership of Arm after its public re-listing in 2023.
 

Major Announcement from Jensen Huang

At the summit, Nvidia CEO Jensen Huang made a significant announcement, stating: "Today we're excited to reveal our partnership with SoftBank to create an AI infrastructure for Japan. Together, we will build Japan's largest AI factory using Nvidia DGX technology."

Nvidia DGX is the company's AI enterprise platform, described as a "modern, unified AI development solution" that combines software, infrastructure, and expertise. It serves as the foundation where AI applications come to life.

SoftBank plans to integrate Nvidia's technology to enhance its telecommunications network, expanding beyond traditional voice, data, and video services. This integration will be rolled out across the 200,000 SoftBank sites in Japan.

Additionally, SoftBank intends to establish an "AI store" to provide AI services to its 55 million customers, all powered by Nvidia's AI enterprise platform. The outcome will be an "AI grid" that spans across Japan. Huang emphasized its revolutionary nature, stating, "This is the first of its kind to transform a telecommunications network into an AI network."

Analysts Remain Optimistic on Nvidia Despite Market Pressures and Technical Weakness
Despite these pressures, analysts continue to hold an optimistic outlook for Nvidia. Piper Sandler has increased its price target from $140 to $175, projecting a 20% upside for the stock. They anticipate that the total AI accelerator market could reach $70 billion by 2025, positioning Nvidia as a key beneficiary.

Similarly, Melius Research has raised its target from $165 to $185, maintaining a buy rating despite current market challenges. Nvidia has also gained further recognition in the market, recently replacing Intel in the Dow Jones Industrial Average.

However, from a technical perspective, Nvidia stock has exhibited some weakness. The relative strength line has seen a sharp decline, indicating underperformance relative to the S&P 500 index. Additionally, institutional investors have adopted a cautious stance, as reflected in a D- Accumulation/Distribution Rating.

Current trading patterns suggest key support levels to watch. Investors are keeping an eye on the October 31 low of $132.11 and the October 2 low of $115.14 as important technical indicators.