Shares in Nvidia have dropped, even though the AI chip company easily beat expectations by more than doubling its sales. Nvidia reported record revenues of $30 billion (£24.7 billion) in just three months. This comes as Nvidia has been one of the main winners of the AI boom, boosting its stock market value to over $3 trillion.
However, analysts say that Nvidia’s rapid growth might be slowing down, which could be a reason for the stock’s decline, as mentioned by Simon French, head of research at Panmure Liberum.
Analysts had predicted sales would reach $28.7 billion for the three months ending on 28 July. Nvidia exceeded this, with revenues increasing by 122% compared to the same time last year. Despite these impressive numbers, Nvidia’s share price fell by 6% in after-hours trading in New York on Wednesday. On Thursday, its shares were down by around 2% in early trading.
Still, Nvidia’s stock has risen by about 150% so far in 2024, making it one of the top performers in the U.S. market. Matt Britzman, a senior equity analyst at Hargreaves Lansdown, said it’s no longer just about beating estimates; the market now expects Nvidia to greatly surpass them. BBC reported these views.
Nvidia’s CEO, Jensen Huang, stated that “Generative AI will revolutionize every industry.” However, Simon French told BBC that Nvidia needs to keep growing at impressive rates if they are setting such high expectations.
He also mentioned that production delays with Nvidia’s next-generation AI chip, Blackwell, might be another reason why Wall Street reacted negatively after hours.
Nvidia’s results have become a big event on Wall Street, leading to a frenzy of buying and selling shares. A “watch party” was even planned in Manhattan, according to BBC, while Mr. Huang, known for his leather jacket, has been called the “Taylor Swift of tech.”
BBC also highlighted comments from Alvin Nguyen, a senior analyst at Forrester, who said both Nvidia and Mr. Huang have become the “face of AI.”
This strong association with AI has benefited the company but could hurt its valuation if AI doesn’t live up to the massive investments firms are making in the technology.
Nguyen told BBC that while Nvidia’s products are top-notch, competitors like Intel could eventually catch up and challenge its dominance, though this could take time.
Credit : BBC
https://www.bbc.com/news/articles/c984jrj24wyo