Nvidia's highly anticipated quarterly forecast fell short of soaring investor expectations on Wednesday, leading to a 6 per cent decline in the chipmaker's stock during after-hours trading.
Despite posting decent growth and profitability, Nvidia's projections for the current quarter failed to match the heightened benchmarks set by Wall Street, tempering the market's previously unwavering enthusiasm for the tech giant.
The company's forecasted revenue of USD 32.5 billion for the third quarter, while above analysts' average estimate, was not the resounding beat investors had grown accustomed to. Nvidia's adjusted gross margin forecast of 75 per cent, slightly below expectations, further dampened sentiment.
This muted response came despite the company unveiling a USD 50 billion share buyback and reporting second-quarter revenue of USD 30.04 billion, which was over estimates.
The market's reaction pointed to the growing pressure on Nvidia, whose stock has surged over 150 per cent this year, adding USD 1.82 trillion to its market value. The company's capacity to continue surpassing expectations is becoming increasingly precarious, as each success drives Wall Street to set even higher targets. This dynamic has left investors jittery, especially given Nvidia's central role in the booming generative AI market.
Nvidia CEO Jensen Huang stressed on the ongoing strong demand for the company's powerful graphics processors, crucial for AI technologies like OpenAI's ChatGPT. However, he also confirmed that the production ramp-up of Nvidia's next-generation Blackwell chips has been delayed until the fourth quarter. While downplaying the impact of this delay, Huang noted that customers were still eager to purchase the current-generation Hopper chips.
The fallout from Nvidia's forecast extended beyond its own stock. Shares of other prominent chipmakers, including Advanced Micro Devices and Broadcom, also dropped nearly 4 per cent, while Asian semiconductor firms such as SK Hynix and Samsung saw declines in Thursday's morning trading.
Nvidia's quarterly filing revealed that the company is facing regulatory scrutiny in the US, South Korea, and several other regions regarding its sales practices and partnerships within the AI sector. These regulatory pressures, coupled with investor concerns about the long-term viability of generative AI investments, have added further uncertainty to Nvidia's outlook.
(Inputs from Reuters)
