Nvidia Stock Drops as Nscale IPO Faces Pushback and Neoclouds Plunge

Key Insights

• Nvidia stock has dropped for two consecutive weeks.
• Nscale, a top portfolio company, is facing pushback ahead of its IPO.
• This is happening after the recent Firmus woes.

Nvidia stock has retreated sharply in the past two weeks as investors have remained concerned about the AI industry. This sell-off intensified after Firmus and AirTrunk abandoned their IPOs, sending jitters in the industry. Now, investors are also pushing back against Nscale, another Nvidia-backed neocloud company.

Nvidia, one of the biggest investors in the AI space, is facing some major challenges as some of its portfolio companies struggle. Firmus, an Australian company it backs, decided to pull its initial public offering (IPO) as investors pushed back against its high valuation. It was seeking a $30.5 billion valuation, a few months after it raised funds at a $15 billion valuation.

Now, investors are pushing back against Nscale, another similar neocloud company that is seeking a $33 billion valuation. Such a move would propel Nscale to be one of the biggest companies in the UK. According to Bloomberg, some investors have asked the company to raise cash at a $16 billion to $19 billion valuation.

These developments come at a tough time for companies in the AI space. Top neocloud companies that Nvidia backs, like CoreWeave, IREN, and Nebius, have plunged by over 50% from their all-time highs. Similarly, Bitcoin mining companies that are pivoting to the AI space like Riot Platforms, MARA Holdings, and Core Scientific, have also plunged.

The sell-off continued last week after Gartner warned that these neocloud companies will need to announce big impairments in the next few years. The report cited the gap between what AI companies are spending and what they expect to make in revenue.

Nvidia stock has dropped amid the ongoing slowdown of the biggest companies in the AI industry, which are part of its portfolio. Anthropic’s revenue came in at $16.8 billion in the third quarter, up sharply from $11.6 billion in the second quarter.

These numbers mean that the company is growing at a faster pace. However, the revenue growth was lower than expected. As a result, some investors have started to temper the company’s valuation, with some investors placing an ideal figure at $1.5 trillion.

OpenAI also reported weak financials, with annualized revenue below $50 billion. Before that, media reports suggested that its revenue jumped to over $70 billion. These numbers mean that the sector is slowing. It could be a sign that investors are moving to open-weight companies like Moonshot and DeepSeek.

Looking ahead, the next few weeks will be important for Nvidia shares. SpaceX, a company raising $40 billion to buy Nvidia chips, will publish its financial results on Tuesday. These numbers will be the second ones since the company went public in June this year.

Tesla, another top AI company, will release its results on Wednesday. Meta Platforms, one of the biggest hyperscalers, will release on Wednesday, providing more color on AI spending.

The weekly chart suggests that Nvidia shares have more downside to go in the near term. It formed a shooting star candle, which is made up of a small body and a small upper shadow. This pattern normally leads to a bearish reversal.

The stock has also been forming a rising wedge pattern, which is made up of two ascending and converging trendlines. At the same time, the two MACD lines have formed a bearish crossover. Therefore, the stock is likely to break down, potentially to the psychological level of $200.

This article is for informational purposes only and does not constitute financial or investment advice. Stocks carry substantial market risks, including volatility and potential capital losses. Readers should conduct independent research and consult a qualified financial adviser before making investment decisions.

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