Nvidia’s shares saw a dip in U.S. premarket trading on Thursday, despite the company surpassing earnings expectations for its fiscal second quarter. The slight decline in gross margins and the high bar set by market expectations appeared to overshadow Nvidia’s strong revenue performance.
In premarket trading, Nvidia’s stock initially dropped by 4.6%. By 10:47 AM London time (05:47 AM ET), the loss had narrowed to a 1.46% decline.
On Wednesday, Nvidia reported revenue for the July quarter exceeding $30 billion, a significant 122% increase compared to the previous year. This marks the fourth consecutive quarter of triple-digit revenue growth. However, as Nvidia continues its rapid expansion, the comparisons on an annual basis are becoming increasingly challenging.
Looking ahead, Nvidia provided a revenue forecast of $32.5 billion for its fiscal third quarter, suggesting an 80% year-on-year growth. However, this represents a deceleration compared to the previous quarter’s growth rate. Additionally, the company expects its full-year gross margins to be in the “mid-70% range,” falling slightly short of analysts’ expectations of a 76.4% margin, according to StreetAccount.
Analysts noted that Nvidia would have needed to significantly exceed expectations across the board for its stock to see an immediate boost following the earnings report.
The dip in Nvidia’s stock comes on the heels of a remarkable rally this year, with shares rising more than 150% year to date. Since the beginning of 2023, Nvidia’s stock has surged over 750%, largely driven by its position as a key player in the artificial intelligence boom. Major tech companies have been increasingly investing in Nvidia’s graphics processing units (GPUs) to power their AI training models.
Nvidia’s decline in share price also had a ripple effect across the semiconductor sector, impacting stocks of other major companies, including memory chipmaker Samsung and Taiwan Semiconductor Manufacturing Company, both of which experienced declines on Thursday.
During its earnings call, Nvidia addressed concerns regarding delays in the release of its next-generation Blackwell AI chip. Chief Financial Officer Colette Kress reassured investors, stating, “In the fourth quarter, we expect to ship several billion dollars in Blackwell revenue.”
Nvidia also announced a substantial $50 billion stock buyback program, signaling confidence in its long-term growth prospects despite recent market fluctuations.
