Nvidia Shares Drop Despite Achieving Record Sales
Shares in Nvidia have declined despite the AI chip giant exceeding expectations with record sales. The company reported unprecedented revenues of $30 billion (£24.7 billion) for the past quarter, more than doubling its sales from the previous year.
Nvidia has been a major beneficiary of the AI boom, with its market value skyrocketing to over $3 trillion. However, while analysts are accustomed to Nvidia delivering exceptional sales growth, the latest results suggest a slowdown in this rapid pace, according to Simon French, head of research at Panmure Liberum.
Analysts had predicted sales of $28.7 billion for the quarter ending July 28, but Nvidia surpassed this with a 122% increase compared to the same period last year. Despite the strong results, Nvidia’s stock fell by 6% in after-hours trading in New York.
"It's not just about beating estimates anymore," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "The market expects record-breaking performance, and it seems the scale of this beat didn’t quite meet those heightened expectations."
Nvidia CEO Jensen Huang commented that "Generative AI will revolutionize every industry." However, French noted that high expectations necessitate continued spectacular growth. He also pointed out that the company's next-generation Blackwell chip has faced production delays, which might have contributed to the post-results stock drop.
Nvidia’s quarterly results have become a highly anticipated event on Wall Street, with a "watch party" planned in Manhattan, and Huang being likened to the "Taylor Swift of tech" for his charismatic presence.
Alvin Nguyen, senior analyst at Forrester, mentioned that both Nvidia and Huang have become synonymous with AI. While this has been advantageous, it could negatively impact Nvidia’s valuation if AI fails to meet expectations after significant investments. Nguyen also noted Nvidia's strong market position due to its pioneering products and software ecosystem, but cautioned that competitors like Intel could potentially erode Nvidia’s market share over time if they develop superior products.
