Nvidia’s stock declined despite reporting strong third quarter earnings and holding a bullish outlook for AI chip sales. The shares fell 3.15%, closing lower after initially rising, amid a broader market sell-off affecting major tech companies.
The chipmaker posted earnings per share (EPS) of $1.30 on $57.01 billion in revenue, outperforming analyst expectations of $1.26 EPS and $55.2 billion revenue. This marked a sharp increase from the previous year’s $0.81 EPS and $35.1 billion revenue.
Q4 Revenue Forecast Exceeds Expectations
Nvidia forecasted fourth quarter revenue at approximately $65 billion, surpassing Wall Street’s estimate of $62 billion. CEO Jensen Huang highlighted exceptional demand, stating, "Blackwell sales are off the charts, and cloud GPUs are sold out."
The company’s data center segment led growth with $51.2 billion in sales, beating the $49.3 billion estimate. Gaming revenue came in slightly below estimates, totaling $4.3 billion compared to the expected $4.4 billion. CFO Colette Kress noted that Nvidia’s latest Blackwell Ultra architecture is now the primary choice across customers, while previous Blackwell versions continue to see strong demand.
AI Ecosystem Driving Expansion
Huang emphasized the rapid scaling of the AI ecosystem, with increased adoption in various industries and countries. He described the surge as a "virtuous cycle" where AI technologies expand simultaneously across multiple sectors. This momentum is fueling Nvidia’s strong sales trajectory.
Despite these gains, Nvidia’s revenue from its China-focused H20 chip remained "insignificant," reflecting ongoing regional challenges. The company’s market valuation reached a peak close to $5 trillion recently, illustrating its dominant position in the AI hardware market.
Investor Moves and Sector Outlook
Ahead of the earnings release, notable investors such as Peter Thiel and SoftBank divested their Nvidia holdings, highlighting strategic repositioning amid the AI investment surge. Meanwhile, AMD’s CEO projected the data center market could reach $1 trillion within the decade, underscoring immense industry growth potential.
Nvidia shares have surged over 37% this year, while competitors like AMD have posted even higher gains. However, some investors remain cautious. Michael Burry recently expressed concerns about inflated earnings in AI-related companies due to underreported data center equipment depreciation, urging careful scrutiny of financial results.
Read more at: finance.yahoo.com
