Despite the artificial intelligence company posting a 122% rise in second-quarter revenue compared to the same period last year, shares of chip designer Nvidia spooked investors due to sluggish growth and signs of production problems.
The Silicon Valley company’s revenue more than doubled to $30bn (£23bn), beating the average estimate of $28.7bn. However, investors were worried about signs of a slowdown in growth, particularly for its next-generation AI chips, codenamed Blackwell.
The stock fell as much as 7% in premarket trading, before paring losses to a 2% drop in early trading on New York’s Nasdaq. The chipmaker is the third most valuable company in the world, with a market value of $3.1tn.
Nvidia said deliveries of its Blackwell chips — the 208 billion transistors that carry out calculations to train its massive language model — will be delayed by several months starting in January. Its chief executive, Jensen Huang, had previously said Blackwell would generate “a lot of revenue” for the business this year.
Simon French, chief economist and head of research at investment bank Panmure Liberum, told the BBC: “There were some signs around the edges in the numbers that the growth rate was trying to slow down. Their current AI chip ‘Hopper’ is selling well, but the next, next-generation Blackwell has faced some production delays, and this may be one of the reasons why Wall Street sold off the stock after hours.
Speaking to investors and reporters overnight, Nvidia bosses did not elaborate on the extent of the delay to Blackwell’s deliveries, but said the manufacturing problems had been resolved by TSMC, the Taiwanese semiconductor company that makes the US company’s most advanced chips. Initial samples are now being shipped to a small group of customers, they said
The drop in Nvidia’s stock price dragged down US markets, particularly the S&P 500 index. Nvidia accounts for about 6% of the index’s total value and has helped drive its gains this year after rising more than 160% over the past 12 months.
Matt Britzman, an analyst at investment platform Hargreaves Lansdown, said Nvidia faces a major challenge of how to match the hype. “It’s less likely to beat estimates right now, markets are expecting them to degenerate, and it’s the amount of momentum that seems a touch misleading.”
French noted that while many investors have embraced the theoretical impact of artificial intelligence, saying it could transform nearly every global industry, practical use cases are “yet to be proven.”
“The high expectations for this stock are not just a company, but its broader economic impact,” he said. “If you’re going to raise expectations, you have to keep growing at spectacular rates.”
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Still, Britzman cautioned against reading too much into market reactions, as investors tended to “overstate” the importance of a single set of quarterly results, particularly on the prospects for “AI’s grand scheme.” Instead, he said, companies like Microsoft and Tesla, as well as Facebook and Instagram owner Meta, are “working on a time frame of years, even decades, and investors would be wise to adopt a similar mindset.”
He added: “The question of return on investment, many AI Bears It’s not a major consideration for Nvidia’s biggest customers at this point. Like many before, this cycle won’t be a straight line, but as the ‘build it and they will come’ approach continues, it plays right into Nvidia’s hands.
