Nvidia shares fell even though the artificial intelligence (AI) chip giant handily beat expectations after more than doubling its revenue.
Nvidia announced record revenue of $30 billion (£24.7 billion) in a three-month period.
The company was one of the biggest beneficiaries of the AI boom; its market value rose to over three trillion dollars.
But while analysts have become accustomed to Nvidia’s “spectacular” revenue growth, the latest results suggest that “the pace of growth is starting to slow,” says Simon French, head of research at Panmure Liberum.
Analysts had forecast sales growth of $28.7 billion for the three months ending July 28.
Nvidia exceeded this figure with a 122% increase in revenue compared to the same period last year.
But after the results were released, Nvidia’s share price fell 6 percent in after-hours trading in New York on Wednesday.
On Thursday, the company’s shares lost about 2% in early trading, but the price is still up about 150% for 2024, making the company one of the big winners in the U.S. market.
“It’s not just about beating estimates now,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Markets are expecting to be beaten and it’s the magnitude of today’s beat that seems to have disappointed a little bit.”
Announcing the latest results, Nvidia CEO Jensen Huang said: “Generative AI will revolutionize every industry.”
But French told the BBC: “When you raise expectations that high, you have to continue to grow spectacularly.”
He added that while the current AI chip, called Hopper, is selling well, the next generation of Blackwell chips “have had some production delays and that may be one of the reasons why the stock sold off on Wall Street after the market closed.”
Nvidia’s results have become a quarterly event, triggering a stock buying and selling frenzy on Wall Street.
According to the Wall Street Journal, a “watch party” was planned in Manhattan, while Mr. Huang, who is famous for his signature leather jacket, was “Taylor Swift of Technology”.
Alvin Nguyen, senior analyst at Forrester, told the BBC that both Nvidia and Mr Huang had become the “face of artificial intelligence.”
This has helped the company so far, but could also hurt its valuation if AI does not produce the desired results after companies have invested billions of dollars in the technology, Mr. Nguyen said.
“A thousand use cases for AI are not enough. You need a million.”
Mr Nguyen also said that Nvidia’s first-mover advantage means the company has market-leading products that its customers have used for decades and that it has a “software ecosystem.”
He said rivals like Intel could “take away” Nvidia’s market share if they developed a better product, but that would take some time, he added.
