Nvidia's Stellar Performance Amidst AI Boom and Growing Competition

Nvidia stock slips even after earnings top Wall Street estimates and demand for AI chips surge

A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, N.Y., Aug. 28. Reuters-Yonhap Nvidia may have exceeded Wall Street estimates as its profit jumped -- buffeted by the chipmaking dominance that has cemented Nvidia's place as the poster child of the artificial intelligence boom -- but investors seemed less than impressed. The company reported a net income of to $16.6 billion. Adjusted for one-time items, net income was $16.95 billion. Revenue rose to $30 billion, up 122 percent from a year ago and 15 percent from the previous quarter. By comparison, S&P 500 companies overall are expected to deliver just 5 percent growth in revenue for the quarter, according to FactSet. Still, Nvidia shares slipped nearly 4 percent in after-hours trading. Ryan Detrick, chief market strategist at Carson Group, said that despite growing revenue "it appears the bar was just set a tad too high this earnings season." "Death, taxes, and NVDA beats on earnings are three things you can bank on," Detrick said. "Here's the issue. The size of the beat this time was much smaller than we've been seeing. Even future guidance was raised, but again not by the tune from previous quarters." The company reported second-quarter adjusted earnings per share of 68 cents per share, up from 27 cents a year ago. Nvidia said it expects third quarter revenue to grow to $32.5 billion, plus or minus 2 percent. Nvidia has led the artificial intelligence sector to become one of the stock market's biggest companies , as tech giants continue to spend heavily on the company's chips and data centers needed to train and operate their AI systems. "The people who are investing in Nvidia infrastructure are getting returns on it right away," Jensen Huang, founder and CEO of Nvidia, said on a call with analysts. "It's the best ROI infrastructure, computing infrastructure investment you can make today." Demand for generative AI products that can compose documents, make images and serve as personal assistants has fueled sales of Nvidia's specialized chips over the last year. In June, Nvidia briefly rose to become the most valuable company in the S&P 500. The company is now worth over $3 trillion. A person walks past a sign outside a Nvidia office building in Santa Clara, Calif., Aug. 7. AP-Yonhap Nvidia CFO Colette Kress said during the analyst call that the company is planning to increase production of its Blackwell AI chips beginning in the fourth quarter and continuing through fiscal 2026. Kress said Nvidia expects several billion dollars in Blackwell revenue in the fourth quarter, with shipments of its Hopper graphics processor unit, or GPU, expected to increase in the second half of fiscal 2025. In an interview with Bloomberg Television, Huang said the company will "have a great next year as well." Through the year's first six months, Nvidia's stock price soared nearly 150 percent. At that point, it was trading at a little more than 100 times the company's earnings over the prior 12 months. That's much more expensive than it's been historically and than the S&P 500 in general. That's why analysts warn of a selloff if Wall Street sees any indication that AI demand is waning. Dan Ives, an analyst with Wedbush Securities, called the earnings part of a "historic, meteoric rise from Nvidia and the godfather of AI, Jensen (Huang)." Investors, Ives added, are picking apart "robust numbers" and trying to find holes in them. Although Nvidia said it estimates about $32.5 billion in revenue in the third fiscal quarter, some analysts expected a slightly higher figure, he said. "I view it as kind of like splitting hairs," Ives said. The demand for AI technology is only accelerating, he added, echoing Huang's previous statements that the world is in the midst of the next industrial revolution. "This is the most watched earnings -- not just in tech, but in the market, in many years," he said. "Investors will initially overreact to any sort of short-lived weakness. But I believe this actually put more fuel into the tank of the bull market." (AP)

Nvidia keeps winning. It isn't enough for Wall Street

Nvidia is undoubtedly one of the biggest winners of the artificial intelligence boom -- repeatedly beating estimates, (briefly) becoming the world's most valuable company, and minting millionaire employees. But when the king of AI chips beat earnings estimates again this week, its falling shares reflected unimpressed investors who want more. The chipmaker reported record second-quarter revenue of $30 billion for fiscal year 2025 -- up 122% from a year ago. Analysts had expected revenue of $28.7 billion for the second quarter -- more than double its previous year revenue of $13.5 billion, according to FactSet. Despite the beat, the chipmaker's shares fell 6.9% in after-hours trading on Wednesday after the release -- likely because it fell short of guidance expectations. Nvidia's shares stayed down around 3.9% in pre-market trading Thursday, and remained in the red before recovering some on Friday. The company set its third-quarter revenue guidance at $32.5 billion, plus or minus 2% -- slightly above the average analysts were expecting, but below top end estimates. "The market was clearly hoping for another blowout where expectations were pushed up yet again," Richard Windsor, founder of research company Radio Free Mobile, said. However, Windsor thinks "Nvidia has much better visibility than it is implying," and expects it to beat guidance with revenue of around $34 billion in the next quarter. Thomas Monteiro, senior analyst at Investing.com, said in commentary shared with Quartz that while Nvidia's results "indicate that the AI revolution remains alive and well, the smaller beat compared to the previous quarters adds to the multiple warning signs across the tech space earlier in this earnings season." Windsor offered a similar analysis, saying the market "wanted to see yet another beat and raise," but that Nvidia's "failure to get even bigger has allowed a sliver of doubt to creep in." The company's stock is expected to be "volatile" due to the sales outlook, Bank of America research analyst Vivek Arya said in a BoA Global Research report on Wednesday. Jefferies analysts also noted Nvidia falling short of guidance expectations, but said in a note on Wednesday, "the important point is that the Blackwell delay is in the rearview mirror." Nvidia reported strong demand for its Hopper chips in the second quarter, and expects it will grow in the second half of the year. The company's Hopper graphics processing units, or GPUs, are used for training and inferencing some of the world's most powerful large language models (LLMs). Meanwhile, Nvidia shipped customer samples of its Blackwell AI platform during the second quarter, it said, adding that Blackwell's production will ramp up in the fourth quarter into fiscal year 2026. Nvidia chief executive Jensen Huang previously said Blackwell would ramp up in the third quarter and be with customers in the fourth quarter. As expenses grow for tech companies alongside rising prices for AI infrastructure, "companies are growing increasingly conscious of their margins when it comes to AI," Investing.com's Monteiro said, meaning customers "may need more time to get to the type of spending growth the market had previously predicted." While this doesn't look good for Nvidia "given that the company can only benefit from a sense of urgency amongst other companies before the competition begins to catch up," Monteiro said investors shouldn't worry about a deeper selloff. Companies are still spending on data center chips "regardless of the costs on the other end of the balance sheet," Monteiro said, and because Nvidia is "the sole owner of the market's most valuable commodity," it has the power to continuously change prices based on market demand.

Nvidia Continues To Lead The Way But Competition Is Intensifying - NVIDIA (NASDAQ:NVDA)

On Wednesday, Nvidia Corporation NVDA issued a better-than-expected fiscal second quarter report. However, its shares fell after the report, but still remain about 150% up for the year as Nvidia continues to serve big companies like Microsoft MSFT, Amazon.com Inc AMZN Alphabet GOOGGOOGL, Meta Platforms META and Tesla Inc TSLA. Second Quarter Highlights For the quarter ended in July, Nvidia reported its revenue surged 122% on a YoY basis as it topped $30 billion. After three straight quarters of YoY growth surpassing 200%, revenue of $30.04 billion still surpassed LSEG's estimate of $28.7 billion. Net income more than doubled to $16.6 billion, or 67 cents per share while adjusted earnings per share of 68 cents surpassed LSEG's estimate of 64 cents. The gross margin did slip to 75.1% from the first quarter's 78.4%, but it is up compared to last year's comparable quarter when it amounted to 70.1%. Data center revenue surged 154% YoY to a record $26.3 billion. Before that business took center stage, Nvidia's primary focus was gaming that still brought in $2.9 billion as revenue grew 16% YoY. Its professional visualization business reported revenue grew 20% YoY to $454 million while the automotive and robotics brought in revenue of $346 million. Third Quarter Guidance For the current quarter, Nvidia guided for revenue of $32.5 billion, also surpassing StreetAccount's estimate of $31.7 billion as it expects YoY growth of 80% on the back of strong Hopper demand. Delay of Blackwell chip rollout. The full-scale shipment of next-generation Blackwell AI chip is expected in the fourth quarter, bringing in several billion dollars to the revenue table, but analysts were expecting it in the current quarter. Nvidia has made a change to the GPU mask to improve production yield and is now only sending samples to partners and customers. Its H100 and H200, are being used to fuel a majority of generative AI applications, such as Microsoft-backed OpenAI's ChatGPT, but CEO Jensen Huang noted that the anticipation for Blackwell is incredible. Competition is intensifying, but so are Nvidia's efforts. Second to Apple Inc AAPL on the list of the world's most valuable companies, Nvidia continues to move fast, like AI and the narrative surrounding it. Its competitors are speeding up their AI efforts with Microsoft, Amazon, Google and Meta being on track to spend $185 billion on AI before 2024 comes to a close, according to a JPMorgan analysis. Amazon alone focused on advancing its chip development to lower its reliance on Nvidia. During its last earnings call, Amazon also announced the updated versions of its Trainium and Inferentia chips. But even Amazon is still buying chips from Nvidia whose chips still remain a must for most complex AI tasks. Nvidia's biggest competitor, Advanced Micro Devices AMD also surpassed earnings estimates with its latest quarter that ended on July 30th. While AMD has had a challenging few years, it is taking active steps to ensure a key spot in the AI field. With key acquisitions to strengthen its AI prospects, AMD is aiming to become a complete provider of AI solutions. Unfortunately for AMD and others, Nvidia is doing everything in its power to make it harder for them to catch up. DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice. This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy. Market News and Data brought to you by Benzinga APIs