Nvidia Stock Drops as Earnings Indicate AI

Isn’t Increasing Sales as Expected

 

“AI is still there, but I think people got a little too excited, a little too over-hyped in terms of what we can expect in the near term.”

Maker of AI chips Nvidia is having trouble living up to some really high standards.

Given the high expectations around the part hardware will play in the tech sector’s AI craze, the company’s earnings and revenues are growing by more than 100% but not as much as investors had hoped, according to its earnings report released on Wednesday.

According to Bloomberg, Nvidia’s report “needed to be perfect” considering its almost $2 trillion market valuation, which puts the business smack dab in the middle of the ongoing AI hype bubble.

Shares fell more than six percent on Thursday as a result of the unhappiness of investors.
What then goes wrong? To put it plainly, the market was expecting much more from the chipmaker, as seen by the more than 150 percent increase in share price this year alone.

Is this an indication that investors are beginning to lose faith in the enormous hoopla around artificial intelligence?

Will the so-called “AI bubble” ever burst?
On the subject, investors are split.

The chief trader of US Global Investors, Michael Matousek, said in a Bloomberg interview that “AI is still there, but I think people got a little too excited, a little too over-hyped in terms of what we can expect in the near term.”

According to CNBC, Nvidia lost about 30% of its value in just seven weeks this summer, wiping off most of its gains from this year. Investors were concerned about an AI bubble collapse at the time, which led to a significant selloff sparked by worries about excessive AI spending.

However, over the previous month, the business was able to recover those losses.
The most recent decline also suggests caution on the impending release of chips. Investors are worried that Nvidia won’t be able to meet demand after the firm unveiled its next-generation Blackwell computing platform, which is intended to create and operate generative AI models.

“We anticipate that demand for Blackwell platforms will remain high into the upcoming year,” acknowledged Nvidia CFO Colette Kress in a conference call with analysts.

Nevertheless, CEO Jensen Huang is certain that the AI hype cycle is far from ended and that additional processing power will be all that the AI models of the future require.

He informed analysts, “The frontier models are growing in quite substantial scale.”
It’s uncertain, though, if all of this investment in AI will ultimately provide a profit large enough to appease investors.