Nvidia Fails to Wow Traders. What to Make of Its Earnings Report

8월 29일

Nvidia stock (ticker: NVDA) is up nearly 3,000% in the past five years. Back then, in 2019, no one really cared about its earnings report as it was known mainly for its niche products targeting geeks, gamers and crypto miners. Now, when Nvidia reports, the world listens.

Everyone and their moms were glued to the screen Wednesday afternoon when the company released its quarterly earnings report. The numbers were good — triple-digit growth was there and guidance was calling for even more growth.

Yet investors proceeded to dump the stock. Big time. Shares lost as much as 10% of their valuation in after-hours trading before Nvidia fans scooped up some of those bruised gems at a discount.

Nvidia is worth $3 trillion (depending on the day) — that’s about 6% of the massive $50 trillion valuation of the S&P 500. The lofty price tag is largely due to Nvidia leading the AI boom with its chips being the hottest commodity in the tech world. As a result, Nvidia has turned into a top pick among the thousands of stocks available out there.

That gives you an idea of this stock’s important role. Markets are placing so much significance on Nvidia’s earnings update that you might as well put it on par with the jobs report or a Fed event.

Good but Not Absolutely Mind-Boggling Amazing

Analysts: We expect revenue growth of 115%.
Nvidia: Here’s 122%.
Analysts: Nooo, why not a bigger beat? Disappointed!

Nvidia posted another blockbuster quarter with $30 billion in revenue, up 122%, surpassing Wall Street’s estimates of $28.7 billion. Earnings per share landed at 68 cents a pop, up 152%, eclipsing consensus views of 65 cents. Thanks to the wide profit margins, Nvidia pocketed some $16.95 billion in net profit.

It did say, however, that gross profit margins narrowed quarter on quarter. For the three months to July 28, Nvidia generated an adjusted gross margin of 75.7%, down from 78.9% the previous quarter. Full-year gross margins are projected to sit above 75% while total revenue is expected to hit $120 billion.

With Great Returns Comes Great Responsibility

Here’s a harsh truth: the bigger you become, the higher the expectations for more breakneck growth. Nvidia’s revenue blasted by a supercharged 265% in the previous quarter. And if 122% can’t keep shares above the flatline, then Nvidia’s rapid expansion has turned against it. And by the looks of it, that growth is going to be increasingly challenged. Large-cap rivals are threatening to chip away (pun intended) at Nvidia’s dominance, potentially taking from its market share, diminishing the profit margins and pulling some of its Big Tech clientele.

For the October quarter, Nvidia chief executive Jensen Huang projects revenue of $32.5 billion, which exceeds the average consensus of $31.7 billion. But, then again, it doesn’t exceed it by a lot — and that didn’t sit well with the overly optimistic investors out there.

Not everything was above market expectations. Nvidia’s next-generation AI chip — Blackwell — still hasn’t started shipping and that unnerves some stock holders. Huang tried to assuage investor fears during the earnings call, saying that despite some design-related delays, Blackwell will ramp up production as expected and will bring in “several billion dollars” still this year. In a move to instil confidence and maybe patch things up, Nvidia authorized a juicy $50 billion stock buyback, which is a mere 2% of its market cap.

What are you doing with Nvidia’s shares? Are you a long-term holder or looking for the right entry? Maybe buying this dip? Let us know in the comment section!