Nvidia’s shares took a hit on Thursday as the company’s latest earnings report, despite impressive figures, fell short of soaring market expectations. The company posted a remarkable 122% year-on-year increase in revenue for the July quarter, surpassing $30 billion. Yet, this substantial growth, marking the fourth consecutive quarter of triple-digit increases, wasn’t enough to prevent a dip in investor confidence. Nvidia’s stock initially dropped by 3.8% as markets opened in the U.S., though it later trimmed losses to close down 1.7%.
Investors’ tempered response reflects the mounting challenge Nvidia faces in sustaining its rapid growth trajectory. Although the company issued a bullish revenue forecast of $32.5 billion for the upcoming quarter, suggesting an 80% year-on-year rise, the guidance also points to a potential slowdown compared to the previous quarter's performance. Additionally, Nvidia's projection of gross margins in the "mid-70% range" for the full year, while solid, fell slightly below the 76.4% margin analysts had anticipated.
Analysts noted that Nvidia would have needed to significantly surpass all expectations to drive a further surge in its stock price. This pullback comes after a phenomenal rally, with Nvidia’s shares skyrocketing over 150% this year alone, and more than 750% since the start of 2023. Nvidia has been one of the primary beneficiaries of the artificial intelligence boom, with large tech companies flocking to buy its advanced graphics processing units (GPUs) to power AI models.
The ripple effects of Nvidia’s stock drop were felt across the semiconductor industry, impacting major players like Samsung and Taiwan Semiconductor Manufacturing Co., both of which saw their shares dip on Thursday.
During the earnings call, Nvidia also addressed concerns about reported delays to its next-generation Blackwell AI chip. Despite the rumors, Chief Financial Officer Colette Kress reassured investors, stating that the company expects to generate several billion dollars in revenue from Blackwell in the fourth quarter.
Additionally, Nvidia announced a substantial $50 billion stock buyback program, signaling confidence in its long-term growth prospects.
Nvidia’s slight stumble reflects the high bar it has set for itself in the wake of its extraordinary success, as the company navigates the challenges of maintaining its position at the forefront of the AI revolution.
