Nvidia Shares Tumbled As Outlook Fails to Impress Growth-Hungry Investors

Reuters08-29

[Live Playback: Nvidia FY2025Q2 Earnings Conference Call]

Nvidia forecast third-quarter gross margin on Wednesday that could miss market estimates and revenue that was largely in line, failing to impress investors who have driven a dizzying rally in its shares as they bet billions on the future of AI.

In a sign the market wants more from a company that has trounced even the most aggressive expectations over the past few quarters, Nvidia shares fell 6.8% in overnight trading.

The soft forecast overshadowed a beat on second-quarter revenue and adjusted earnings as well as the unveiling of a $50 billion share buyback.

Nvidia's stock has risen more than 150% so far this year. Its tepid forecast may weaken the artificial-intelligence rally that has lifted shares of chipmakers and tech firms over the past year.

"Here's the issue, the size of the beat this time was much smaller than we've been seeing," said Ryan Detrick, chief market strategist at the Carson Group.

"Even future guidance was raised, but again not by the tune from previous quarters. This is a great company that is still growing revenue at 122%, but it appears the bar was just set a tad too high this earnings season."

Nvidia expects adjusted gross margin of 75%, plus or minus 50 basis points, in the third quarter. Analysts on average forecast gross margin to be 75.5%, according to LSEG data. It reported a 75.7% gross margin in the second quarter versus an average estimate of 75.8%.

Investors had lofty expectations of the chipmaker, following a more than sevenfold surge in Nvidia's shares over the last two years - making it one of the biggest beneficiaries of the rally in AI-linked shares.

The company's capacity to surpass estimates faces increasingly greater challenges as each success prompts Wall Street to raise its targets even higher.

The company forecast revenue of $32.5 billion, plus or minus 2%, for the third quarter, compared with analysts' average estimate of $31.77 billion, according to LSEG data.

Second-quarter revenue was $30.04 billion, beating estimates of $28.70 billion.

Sales in Nvidia's data center segment grew 154% to $26.3 billion in the second quarter ended July 28, above estimates of $25.15 billion. From the first quarter, it increased 16%.

The company said it expects several billion dollars in revenue from its latest Blackwell chips in the fourth quarter, addressing widespread concerns of reported production delays hampering growth.

"Blackwell samples are shipping to our partners and customers," CEO Jensen Huang said in a statement.

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Comments

  • Dr Rck
    08-29
    Dr Rck
    The return of investment is not justifiable based on its valuation so it has been a pump and drop situation knowing too many investors are pumping money into NVDA for just a chip company unlike TSLA which is more than just a car company. Having said that TSLA is much more overvalued than NVDA and TSLA ROI is still yet to be seen.... if economy is still good then there is no need for a rate cut. Earlier I had said regardless of how NVDA fared, it would still drop because there is a lot of priced in into the stock already, so it is time to settle down. Likewise for the stock market, it has to self correct to ensure rate cut will take place. Past contributionS to the economy were based out of govt spending and big companies on data centres, no whatsoever any significance was given to the
  • Des79
    08-29
    Des79
    Its just give us another opportunity to buy the stock. Buy cheap and earn more profits. Maybe it could be our last to buy cheap.  
  • StompyNZ
    08-29
    StompyNZ
    Good earnings report does not justify such a big sell down.  What's the odds that it will pop back over 130 next week after those 146k 130 strike calls expire on Friday. Feels like bulls are being played hard on this one. 
  • AsxBets
    08-29
    AsxBets
    This is a major bull trap, be aware it's probably going to drop back to 90-80 range
    • HLPA: 
      buy mote on way down
  • Daytraderz
    08-29
    Daytraderz
    So question is how are we gona play this
    • HLPA: 
      capitalise on the price momentum and make daily profits via scalping
  • Guavaxf30
    08-29
    Guavaxf30
    Wild panic selling seen today despite generally strong actual results. The sell down has been attributed to lower than expected forecast but the link to the delay of Blackwell chip rollout gives hope it is just a temporary blip in the projections.  On days like this, take the day off and don't do any trading. DON'T PANIC.
    • Maria_yy: 
      No worries
    • BlithePullan: 
      Absolutely, taking a break and staying calm during volatile times is essential.
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