Why Markets Are Disappointed With Nvidia

After markets closed on Wednesday, Nvidia (NVDA) posted second-quarter results that beat expectations. That was not enough for investors, as shares dipped by around 3% in after-hours trading. Nvidia earned $1.05 a share (non-GAAP) on revenue of $46.74 billion (+55.6% Y/Y). Data center revenue accounted for most of the growth. It rose by 56% Y/Y to $41.1 billion. In the third quarter, revenue of $54.0 billion is nearly $2 billion above expectations. The firm did not assume any H20 shipments to China in its outlook. This exclusion gives Nvidia room to beat expectations. Although Chinese firms halted orders of the chip on speculation that they had tracking or back doors, things might change. To reward shareholders, Nvidia will buy back up to $60 billion in stock. This has similarities to Apple (AAPL). While Apple announced a buyback of over $100 billion, the device maker posted several quarters of declining sales. Nvidia’s 20% Q/Q growth is a $220 billion revenue run rate starting in the next quarter. Markets are likely taking some profits in case the AI-fueled growth ends. AI is still in the early phases of explosive growth. Companies are competing with each other to offer better AI solutions. They would need to incorporate AI in robots and other use cases. The next step for AI is AGI, or artificial general intelligence. Getting there would require more Nvidia GPU AI chips.