Chipmaker Nvidia set new sales records in the second quarter, surpassing Wall Street's expectations for artificial intelligence chips. However, Chip Giant's stock fell 2.3% after opening hours amid signs that investors weren't suppressed by AI bubble worries and the impact of Donald Trump's trade war.
Nvidia's financial report was the first test of investor appetite since last week's Mass AI-Stock Selloff. This saw some tech stocks fall last week amid growing doubts about whether AI-driven companies are overvalued.
On Wednesday, NVIDIA reported adjusted earnings per share at $1.08 with revenues of $467.4 billion. FactSet data surpasses Wall Street's earnings per share forecast.
However, investors had high expectations for the company. Part of the market response may be to minor mistakes in other parts of the company's business, including data center revenue. Nvidia missed what Wall Street had expected, with a record $41.1 billion in data center revenue.
“We're looking forward to seeing you in the future,” said Thomas Monteiro, senior analyst at Investing.com. “To say that stock prices are priced for perfection would be a huge understatement because in reality we needed another large beat.”
The company also said it had not anticipated shipping of the H20 chip to China in its outlook.
The tip is at the heart of concern over the impact of the US-China trade war. Earlier this year, Trump banned the sale of AI chips in China. This hit Nvidia's finances by $4.5 billion in the first quarter. In August, Nvidia agreed to offer the US government a 15% reduction in H20 chips to China in return for export licences. China has expressed security concerns about chips and is stepping up production of its own domestic alternatives.
Colette Kress, Nvidia's Chief Financial Officer, said in a revenue call that some companies have expressed interest in purchasing H20, and that the first set of companies has received a license to buy tips. Cress said the company could ship between $2 billion and $5 billion of H20 chips to China if “geopolitical issues exist.”
Huang has repeatedly reiterated the importance of being able to operate in the Chinese market. “We're talking to the administration about the importance of being able to address the Chinese market for American companies,” Huang said. He also said that in addition to the fact that H20 has been approved for sale in China by unlicensed companies, there is a potential opportunity for the company to ultimately sell a version of Blackwell in the country.
“It is the world's second largest computing market and home to AI researchers. Approximately 50% of the world's AI researchers are in China,” says Huang. “The majority of the major open source models are created in China. It's pretty important that American tech companies can handle that market.”
“We're looking forward to seeing you in the future,” said Monteiro, an Investing.com analyst. “The reality is that without much needed push from H20 sales in China, Nvidia cannot maintain the type of growth that was devoted to that evaluation.”
The company forecasts revenue of $54 billion in the third quarter. This is within Wall Street's expectations, saying the board has approved $600 billion in additional share buybacks.
Founder and CEO Jensen Fan said production of the company's latest AI superchip, Blackwell, was “increasing at full speed and demand is extraordinary.
“AI races have begun and Blackwell is the central platform,” Huang said in a press release.
Despite the initial lukewarm market response to the company's finances, some analysts remain bullish on the so-called AI revolution, especially as major technology companies such as Meta, Microsoft, Amazon and Alphabet have invested heavily in AI infrastructure. “This is a further examination of Nvidia and the AI revolution,” said Dan Ives, analyst at Wedbush Securities.
“This is a very important printing and guide for the wider technology world, indicating that despite the current headwinds with China, the AI revolution is heading towards the next growth device. One chip in the world is fueling the AI revolution and its Nvidia.
