Nvidia shares decline as growth expectations fall short | Financial News
Nvidia, the chipmaker driving the boom in artificial intelligence (AI), has experienced a drop in its share price after an earnings report due to ongoing supply chain constraints.
In its third quarter trading update, Nvidia indicated that demand for its top generative AI chips would continue to exceed supply for at least a year.
Some might view this as a positive problem to have, but the constraints on revenue have been cited as a reason for Nvidia not meeting market expectations for revenues this year, thus hindering its overall performance.
Nvidia reported revenues of just over $35bn over the past three months – surpassing the $33bn consensus, according to LSEG data.
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The company, which has been ranked as the most valuable listed firm multiple times since late spring, has seen a significant surge in its share price, particularly in 2023.
Despite the strong performance of its shares – up by 190% year-to-date and nine-fold over two years – they have faced some challenges in the latter half of 2024.
This can be attributed to investor concerns regarding AI prospects, competition for Nvidia, and delays in the release of its next-generation Blackwell chips.
Nvidia’s stock prices unexpectedly dropped despite impressive earnings figures for the first half of its financial year, and further declined when widespread US market uncertainties arose at the start of September due to concerns about the US economy.
Fears of overvalued tech stocks also played a role in the decline.
Nvidia CEO Jensen Huang remarked on sales: “The era of AI is in full swing, driving a global shift to NVIDIA computing.
“The demand for Hopper and anticipation for Blackwell – currently in full production – are extraordinary as foundation model creators scale pretraining, post-training, and inference,” he stated about the chips.
Jensen Huang is Nvidia’s chief executive. Pic: AP
Market analysts stated, ahead of the earnings update, that a positive share price reaction would hinge on the revenue guidance surpassing expectations and a broader outlook being provided.
They sought assurance that the rollout of Blackwell was proceeding as planned to justify the recent share price recovery, which the tech sector has experienced since Donald Trump’s US presidential election victory was announced.
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One of the bottlenecks for Nvidia’s chip supply has been the limited capacity for advanced production techniques at its manufacturing partner TSMC.
The revenue guidance for the fourth quarter was set at $37.5bn compared to the market forecast of $37bn.
Shares experienced over a 2% drop in after-hours trading, following a decline during regular Wall Street hours.
