Chips are down
As a proxy for the AI revolution, Nvidia's performance is watched more closely than any other company. And as today's results showed, it only takes a hint of trouble for investors to punish the stock.
For weeks, analysts and investors have been bracing for Nvidia’s Q2 earnings with the sort of sweaty intensity usually reserved for asteroid near-misses. With the company alone representing over 8% of the Nasdaq 100 and a third of S&P 500 market cap gains this year, the minutiae of its earnings were viewed with civilisational importance.
It was never in doubt that Nvidia would perform strongly, and the stock was priced accordingly. But even its solid outperformance of Wall Street expectations — record revenue of USD30 billion ($44 billion), representing a 122% increase year on year and a 15% increase from the previous quarter, plus a confident stock buyback — was viewed as a disappointment by investors, sending the stock tumbling as much as 8.4% in after hours trading.
Nvidia now finds itself in a precarious position at the top of the world. Its forecasts, which are treated as a temperature check for how the AI revolution and its attendant spending boom are tracking, were seen as underwhelming.
Its next-gen Blackwell chips, which promise performance and cost improvements in AI processing, are proving tougher to manufacture than expected. CEO Jensen Huang acknowledged those issues, while vaguely dismissing concerns they are an ongoing risk.
