AI chip giant Nvidia share fell despite recording record sales.
Shares in Nvidia have fallen, despite the AI chip giant beating expectations with record revenues of $30bn over a three-month period.
The company has been one of the biggest beneficiaries of the AI boom, with its stock market value soaring to more than $3 trillion. However, while analysts have grown used to Nvidia producing "spectacular" sales growth, the latest results indicate that the rate of growth was starting to slow," said Simon French, head of research at Panmure Liberum.
Analysts had predicted sales growth of $28.7 billion for the three months ending on 28 July.
Nvidia exceeded this expectation with a 122% increase in revenue compared to the same period last year.
However, after the results were released, Nvidia's share price dropped by 6% in after-hours trading in New York on Wednesday. On Thursday, its shares were down about 2% in early trading, but the stock is still up around 150% so far in 2024, making it one of the big winners in the US market.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, stated, "It’s less about just beating estimates now. Markets expect them to be shattered, and it’s the scale of the beat today that looks to have disappointed a touch."
Nvidia's CEO Jensen Huang announced, "Generative AI will revolutionize every industry."
However, Mr. French expressed his concerns, stating, "If you’re going to raise expectations that high, then you’ve got to keep growing at spectacular rates." He also mentioned that while their current AI chip, Hopper, is selling well, the next generation Blackwell chip "has faced some production delays, and that perhaps is one of the reasons why Wall Street after-hours sold off the stock."
Nvidia's results trigger frenzied buying and selling shares on Wall Street, with a "watch party" even being planned in Manhattan. Meanwhile, Mr. Huang, known for his signature leather jacket, has been dubbed the "Taylor Swift of tech."
Alvin Nguyen, senior analyst at Forrester, stated that both Nvidia and Mr. Huang have become the "face of AI." He warned that while this has helped the company so far, it could hurt its valuation if AI fails to deliver after firms have invested billions of dollars in the technology. He emphasized the need for a multitude of use cases for AI and the significance of Nvidia's market-leading products and software ecosystem.
Mr. Nguyen also suggested that rivals like Intel could "chip away" at Nvidia's market share if they developed a better product, although he acknowledged that it would take time.
