Nvidia trails SMH by 73 points as chip price bets turn bearish

Nvidia Corp. shares have risen just 12% in 2026, trailing the VanEck Semiconductor ETF's 85% surge, as Kalshi prediction market traders increasingly bet that chip prices are heading lower.

"The market is rotating away from the single-name AI winner trade into the broader infrastructure buildout," said Stacy Rasgon, analyst at Bernstein. "Memory and networking are capturing incremental dollars."

Nvidia's latest quarterly revenue reached $81 billion, up 85% from a year earlier, with gross margins above 74%. The company's forward price-to-earnings multiple of about 23.5x — well below its five-year average of 34x — suggests investors are already discounting slower growth, even as supply chain obligations of $95 billion over three quarters point to at least $285 billion in future revenue.

The divergence matters because Nvidia has been the defining AI trade of this cycle, with $215 billion in fiscal 2025 revenue and $120 billion in net income. If chip prices decline as Kalshi traders anticipate, Nvidia's pricing power — the core of its investment thesis — faces its first real test since the AI boom began.

The Rotation Beneath the Surface

Wall Street's focus has shifted from Nvidia's dominant GPU lineup to memory chips and AI infrastructure plays. The SMH's 85% rally reflects gains across a broader set of semiconductor names, including memory makers Micron Technology Inc. and SK Hynix Inc., which benefit from the AI data center buildout regardless of which company supplies the processors.

Kalshi, the prediction market platform, shows traders assigning rising probabilities to lower GPU average selling prices over the next six months. While Nvidia's H200 GPU — priced at about $30,000 per unit — delivers a payback period of 2.3 years for hyperscaler customers, according to analyst estimates, any sustained price decline would compress the margins that have made Nvidia the most valuable semiconductor company in history.

Vera Rubin and the Next Act

Nvidia's response is twofold. Later this year, the company plans to launch Vera Rubin, its first standalone central processing unit, targeting the $200 billion CPU market. It is also preparing a superchip that combines GPU and CPU cores for personal computers, broadening its addressable market beyond data center accelerators.

Hyperscaler capital expenditure guidance of $710 billion to $725 billion provides a demand backstop. Amazon.com Inc., Microsoft Corp. and Alphabet Inc. — all developing their own in-house AI chips — remain Nvidia's largest customers, creating an unusual dynamic where the company's biggest buyers are also its most credible competitors.

What It Means for Investors

Nvidia shares trade at 23.5x forward earnings, a discount to the five-year average of 34x, implying the market has already priced in a growth deceleration. If Vera Rubin ramps successfully and results beat consensus, a re-rating toward that historical multiple could add more than $1 trillion in market capitalization. But if chip prices fall faster than expected, the valuation floor could break lower.

This article is for informational purposes only and does not constitute investment advice.