Despite a bumper 16.6 billion USD profit, NVIDIA shares underperformed
2 min readNvidia shares have fallen despite the artificial intelligence (AI) chip giant comfortably beating expectations after more than doubling its sales.
Nvidia announced record revenues of 30 billion USD (24.7 billion euros) in a three-month period.
Despite these strong results, NVIDIA shares fell nearly 6% in after-hours trading on Wednesday , leaving investors perplexed.
The company has been one of the biggest beneficiaries of the AI boom, with NVIDIA’s stock value soaring to more than $3 trillion.
NVIDIA shares in the spotlight
NVIDIA has catapulted the artificial intelligence sector into one of the most dominant forces in the stock market, as tech giants continue to pour resources into the company’s chips and data centers essential to the operation of AI systems.
Chief Financial Officer Colette Kress told analysts during a post-earnings call that countries developing its AI applications and models are expected to add double-digit billions to NVIDIA’s revenue by the end of the fiscal year in January 2025.
“That’s the thing,” said Ryan Detrick, chief market strategist at Carson Group. “The magnitude of the hit this time was much smaller than what we’ve been seeing.” He added: “Even forward guidance was raised, but again, not as much as in previous quarters. This is a great company that continues to grow revenue by 122%, but it seems like the bar has been set too high this earnings season.”
For the past three consecutive quarters, Nvidia stock has seen revenue growth of more than 200%. The company’s ability to beat estimates is increasingly in jeopardy as each success prompts Wall Street to raise its targets even higher.
Investor nervousness
NVIDIA CEO Jensen Huang acknowledged that the company has delayed the development of its next-generation Blackwell chips until the fourth quarter, raising concerns among investors.
Still, Huang and Kress maintained their forecast of billions in fourth-quarter revenue from Blackwell chips.
“It’s a reflection of growing investor nervousness about the long-term viability of the generative AI market, as the entire market appears to hinge on Nvidia’s performance,” said Jacob Bourne, an analyst at eMarketer.
The company said in its quarterly filing that it has received requests for information from regulators in the U.S. and South Korea , relating to “GPU sales, our efforts to allocate supply, foundation models, and our investments, partnerships, and other arrangements with companies developing foundation models.” Previously, the company had only received inquiries from the EU, the U.K., and China.
Nvidia shares expect an adjusted gross margin of 75%, plus or minus 50 basis points, in the third quarter. Analysts on average expect a gross margin of 75.5%, according to LSEG data. In the second quarter, gross margin was 75.7%, versus an average estimate of 75.8%.
Its gross margin remains higher than its rivals, helped by high prices for its speedy chips. AMD posted an adjusted margin of 53% in its fiscal second quarter.
