Nvidia's stock fell 0.7% in after-hours trading Monday, following a 2.9% decline during the regular session. This drop came after Reuters reported that OpenAI is dissatisfied with some of Nvidia's latest AI chips and is seeking alternatives. The move highlights a competitive battleground in the semiconductor industry, particularly for AI inference, where models like ChatGPT respond to user queries.

The news puts pressure on Nvidia's dominant position in the AI chip market. While Nvidia remains the leader in chips for training large AI models, inference has become a new battleground. This development could strain the relationship between Nvidia and OpenAI, especially as the companies have reportedly been in investment talks. Earlier, Nvidia's stock declined following a Wall Street Journal report that negotiations for Nvidia to invest up to $100 billion in OpenAI had broken down.

Nvidia CEO Jensen Huang later clarified the company's involvement in OpenAI's current funding round, though he indicated the investment would be much smaller than previously reported. This shift reflects the challenges Nvidia faces as major customers like OpenAI explore alternatives for specific AI processing needs. Analysts, such as Daniel O’Regan from Mizuho, suggest that the news hurts sentiment around a key customer, potentially impacting Nvidia's market position.