US tech stocks experience uncommon share price decrease following Nvidia earnings report | Business News
Despite reporting stronger than expected earnings, US tech stocks, including Nvidia, are falling. Nvidia, the chipmaker that has been driving the artificial intelligence (AI) led stock market boom, reported second quarter revenue of over $30bn, which is more than double the amount achieved in the same period last year. The company’s crucial forecast for sales in the current quarter is $32.5bn, slightly exceeding estimates.
Nvidia‘s shares experienced a rare decline following the earnings update, with a drop of up to 6.8% in after-hours trading and additional losses during Wednesday’s main trading hours. Major customers like Meta and Amazon also saw their shares decrease by around 1%.
Nvidia, holding 80% of the AI chip market, is closely watched for signals on the continued growth of the AI investment opportunity. Concerns arose at the beginning of August when US data hinted at a possible recession, causing a brief but sharp global stock sell-off. While unlikely, a recession would pose a risk to demand for AI and Nvidia’s products.
With a market value of $3.2trn, Nvidia’s success has been significant. The company’s shares have surged by 3,000% since 2019, positioning it just behind Apple in terms of market value. However, fears of a potential bubble burst in the tech sector have emerged, given the rapid rise of tech stocks compared to the market and their susceptibility to value versus earnings shocks.
Recent price fluctuations, partly due to concerns about a delay in the launch of Nvidia’s upcoming Blackwell chips, have caused some uncertainty. Nonetheless, the company’s existing Hopper chips are expected to mitigate any short-term challenges until the Blackwell chips are released.
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Nvidia confirmed they had already distributed Blackwell pilots to customers and partners and anticipated sales to increase by the end of the year. The US equity options market had expected the earnings report to have a significant impact on shares, with analysts predicting a swing of more than $300bn. However, the decline in share prices may reflect concerns regarding valuation.
According to Matt Britzman, senior equity analyst at Hargreaves Lansdown, Nvidia’s performance has consistently exceeded expectations, but the market now anticipates even greater results. Despite beating estimates for the seventh consecutive quarter, the market may have been disappointed by the scale of the beat in the latest update.
