Nvidia, the artificial intelligence (AI) chip giant, has left you wondering why its shares have fallen despite announcing record revenues of $30bn (£24.7bn) over three months.
The company's sales have more than doubled, comfortably beating expectations, yet its share price fell by 6% in after-hours trading in New York on Wednesday.
You might be thinking, "How can this be?"
Analysts had forecast sales growth of $28.7bn for the three months to 28 July, and Nvidia surpassed this with revenues increasing by 122% compared to the same period last year.
However:
The latest results indicate that the rate of growth is starting to slow, according to Simon French, head of research at Panmure Liberum.
The company's stock market value has soared to more than $3 trillion, making it one of the biggest beneficiaries of the AI boom.
But it seems that analysts and investors have grown used to Nvidia producing "spectacular" sales growth, and the latest results didn't quite meet their expectations.
As Matt Britzman, senior equity analyst at Hargreaves Lansdown, put it, "It's less about just beating estimates now.
Markets expect them to be shattered and it's the scale of the beat today that looks to have disappointed a touch."
Announcing the latest results, Nvidia chief executive Jensen Huang said, "Generative AI will revolutionise every industry."
However, Mr French told the BBC that if you're going to raise expectations that high, then you've got to keep growing at spectacular rates. He added that while its current AI chip - called Hopper - is selling well, the next generation Blackwell chip "has faced some production delays and that perhaps is one of the reasons why Wall Street after-hours sold off the stock."
Nvidia's results have become a quarterly event that sends Wall Street into a frenzy of buying and selling shares.
Alvin Nguyen, senior analyst at Forrester, told the BBC that both Nvidia and Mr Huang have become the "face of AI".
This has helped the company so far, but it could also hurt its valuation if AI fails to deliver after firms have invested billions of dollars in the technology, Mr Nguyen said. "A thousand use cases for AI is not enough.
You need a million." He also said that Nvidia's first-mover advantage means it has market-leading products, which its customers have spent decades using and has a "software ecosystem".
Mr Nguyen warned that rivals, such as Intel, could "chip away" at Nvidia's market share if they developed a better product, though he said this would take time.
Despite the current setback, Nvidia's shares remain about 150% up so far in 2024, making it one of the big winners in the US market.
As you navigate the ups and downs of the AI chip giant's journey, one thing is clear:
Nvidia is still a force to be reckoned with in the world of AI.
Source:
Mitchell LabiakBusiness reporter, BBC News
