Nvidia shares were lower in the US market after the chip maker smashed Q3 revenue and earnings estimates but fell short of analysts’ expectations for Q4 revenue guidance.
The 4% drop in Nvidia shares despite sales nearly doubling in Q3 compared to the prior year underscores just how high investors’ expectations are for the chip maker that has led the AI-fueled rally in US tech stocks.
Some called yesterday’s earnings release the biggest ‘macro’ event of the week, highlighting the narrow nature of the US equity rally focused on just seven tech shares and the impact their earnings can have on the global equity market.
Despite missing revenue guidance predictions, Nvidia’s results were nothing short of astounding. The company has nearly doubled its revenue in a year and expects revenue growth to continue apace through the rest of the year. Bloomberg News pointed out that Nvidia’s data centre revenue is larger than the total revenue of both AMD and Intel combined.
“Nvidia has once again breezed past expectations and set the scene for a blockbuster finish to the year. Data Center took the lion’s share of the glory, growing revenue 112% to $30.8bn,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“And the base of that demand is growing beyond the AWS’s and Azures of this world, with customers of note including Softbank, who are set to become an early adopter of next-generation Blackwell chips and the Danish government. It’s also helping to underpin AI infrastructure with local cloud providers across India, Japan and Indonesia.”
The big question for investors is whether Nvidia’s softer-than-expected sales guidance is enough to derail the broader AI rally. Lower US equity future indicates investors aren’t entirely happy with the results. However, the small scale of the declines suggests investors are marginally disappointed with the results rather than fearful the AI trade is over.