NVIDIA Corporation (NVDA) is encountering significant inventory growth, which analysts suggest points to a shift in its market position despite the continued high investment in AI by major cloud providers. This accumulation of stock, particularly when mirrored by competitors, signals a potential weakening of NVIDIA's scarcity advantage and a more challenging competitive environment. The company's future growth trajectory may be impacted as the market evolves.
In the third fiscal quarter of 2025, NVIDIA's inventory climbed to an notable $19.7 billion, translating to approximately 105 days of inventory. This figure stands above the company's average over the past three years. This increase isn't an isolated incident; a primary rival, AMD, also recorded a multi-year high in its inventory levels during the fourth fiscal quarter, reinforcing the broader market trend of rising stock. Such trends suggest a normalization of supply, potentially leading to increased competition.
This inventory surge implies a decrease in the unique market position NVIDIA has enjoyed, known as its 'scarcity premium.' The dynamic is further complicated by hyperscalers, large cloud service providers, actively investing in and developing their own custom Application-Specific Integrated Circuits (ASICs). These customized chips allow hyperscalers to reduce their reliance on external vendors like NVIDIA and AMD, intensifying direct and indirect competition. The move towards in-house solutions by these major customers could diminish NVIDIA's market share and pressure its profit margins.
The current market indicators, including NVIDIA's expanding inventory and the competitive landscape marked by hyperscalers' strategic shifts, underscore a critical juncture for the company. The previous analysis in December 2025 had already hinted at a period of consolidation for NVIDIA in the coming year. The latest inventory data provides further evidence of these evolving market pressures, suggesting a need for strategic adaptation to maintain its leadership in the semiconductor industry.
The growing inventory levels for both NVIDIA and its competitors highlight a broader trend in the semiconductor market, where a previous scarcity of high-performance chips is giving way to a more balanced supply-demand scenario. This shift has significant implications for pricing power and market dynamics, as customers may have more options and leverage. NVIDIA will likely need to navigate these changes by innovating and strengthening its competitive advantages beyond simply product availability.