Why Did Nvidia (NVDA) Stock Slump Today?

Shares of Nvidia Corporation (NASDAQ:NVDA) were down more than 3.3% through early afternoon trading Thursday. The dip appears to be a cautionary response to recent reports that a certain electric car giant had chosen its chip-making rival for a new AI partnership.

On Wednesday afternoon, CNBC reported that Tesla (NASDAQ:TSLA) had recruited the services of Advanced Micro Devices (NASDAQ:AMD) to develop an AI-powered self-driving car chip. According to the publication’s source, Tesla has assigned more than 50 employees to the project.

Wall Street’s immediate reaction was to declare the partnership a significant validation of AMD’s technology, and shares of the chipmaker subsequently popped more than 5% on Wednesday afternoon (also read: Investors Bullish on AMD's AI Partnership with Tesla).

“The net/net here for AMD is that Tesla has confirmed AMD's CPU and GPU roadmaps in a field that nobody was considering as viable; it says that AMD's CPU/GPUs in PC and server markets are the real deal,” said Rosenblatt Securities analyst Hans Mosesmann in a note.

Up to this point, Nvidia has been considered the standalone AI chip king, so an entrance into this booming market by AMD—already a major competitor in the GPU space—might be enough to make some investors cautious.

However, we’ve already seen some detraction from CNBC’s original story. In fact, Reuters just published a new report that cited a spokesperson from GlobalFoundries, which fabricates chips for AMD, who said that Tesla has not committed to any partnership with the chipmaker.

“Tesla has not committed to working with us on any autonomous driving technology or product,” the spokesperson told Reuters.

On top of this, it’s unlikely that the partnership would have a significant impact on AMD’s bottom line, so analysts were quick to tell Nvidia investors to shake off the news. In a note on Thursday, RBC Capital analyst Mitch Steves told investors to “ignore the noise,” while B. Riley analyst Craig Ellis said the report was more of a “psychological” negative than anything else.

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