Nvidia takes a hit despite record sales

Nvidia failed to impress Wall Street with a higher-than-expected third-quarter revenue forecast based on demand for its artificial intelligence chips.
The chip designer, which is at the centre of the AI frenzy, reported record second-quarter sales of $30.04 billion, up 122 per cent on the previous year and ahead of analyst estimates of $28.6 billion. Its forecast of third-quarter sales of $32.5 billion beat consensus forecasts but disappointed some analysts who ­estimated sales as high as $37.9 billion.
Immediately after the earnings report was released, shares in Nvidia, which have risen almost 170 per cent over the past year, fell by 8 per cent before paring some of the losses to trade 5.9 per cent, or $7.37, lower at $118.24, valuing the company at $3.1 trillion.
Operating income rose 174 per cent to $18.64 billion, below the $18.8 billion forecast by analysts.
Nvidia counts tech giants including Microsoft, Google and Meta, the owner of Facebook, among its biggest customers, which are investing billions of dollars in AI and cloud infrastructure.
Its chips are used by more than 40,000 companies, from carmakers and drug discovery businesses to weather forecasters.
Nvidia sought to reassure investors about the production of its next-generation Blackwell AI chip, following reports of delays. It said it had shipped samples of the chip in the second quarter and planned to increase production in the fourth quarter, when it will ship several billion dollars in Blackwell ­revenue.
Founded in Santa Clara, California, in 1993, Nvidia’s rise has been decades in the making. For years, its ­advanced chips were mostly used to generate faster and more realistic graphics for video games. However, demand from a wide range of industries has exploded in recent years as companies bet on the transformative power of generative AI in the wake of innovations such as ChatGPT.
The AI frenzy has helped to boost its shares by almost 680 per cent in the past two years. Having briefly taken the title of world’s most valuable listed company in June, its latest market capitalisation of around $3.11 trillion puts it behind Apple’s $3.45 trillion but ahead of Microsoft at $3.05 trillion.
Jensen Huang, founder and chief executive, said: “Nvidia achieved record revenues as global data centres are in full throttle to modernise the entire computing stack with accelerated computing and generative AI.”
Ryan Detrick, chief market strategist at the Carson Group, a financial advisers platform, said: “Here’s the issue, the size of the beat this time was much smaller than we’ve been seeing.
“Even future guidance was raised, but again not by the tune from previous quarters. This is a great company that is still growing revenue at 122 per cent, but it appears the bar was just set a tad too high this earnings season.”
Jacob Bourne, technology analyst at Emarketer, the research company, said: “Nvidia once again delivered spectacular results, beating expectations with margins that rival its previous blockbuster quarters, despite growing economic uncertainties and AI bubble concerns.”
The results come as OpenAI, the Microsoft-backed start-up behind ChatGPT, is in talks to raise several billion dollars in new funding that would value the start-up at more than $100 billion, The Wall Street Journal reported.