(qlmbusinessnews.com Fri. 30th Aug, 2024) London, UK —
AI Chip Leader Nvidia Reports Record Revenue But Faces Investor Concerns
Shares in Nvidia, the leading AI chip manufacturer, have unexpectedly declined, despite the company announcing record-breaking sales that exceeded market expectations. Nvidia reported an impressive revenue of $30 billion (£24.7 billion) for the three months ending 28th July, significantly surpassing analysts' forecasts of $28.7 billion.
The firm's revenue growth, up by 122% compared to the same period last year, comes amid a surge in demand for AI technologies, which has boosted Nvidia's market value to over $3 trillion. However, the growth rate has shown signs of slowing, causing some investor concerns.
Simon French, head of research at Panmure Liberum, observed that while Nvidia has become known for its remarkable sales growth, “the latest results suggest that the pace of growth may be tapering.” Following the announcement, Nvidia's shares fell by 6% in after-hours trading on Wednesday, with a further 2% decline in early trading on Thursday.
Despite this dip, Nvidia's stock remains up around 150% for the year, continuing to position it as one of the top-performing companies in the US market. Matt Britzman, a senior equity analyst at Hargreaves Lansdown, noted, “It’s not just about beating estimates anymore; markets expect Nvidia to exceed them by a significant margin, and today's results may not have met those elevated expectations.”
Jensen Huang, Nvidia's CEO, highlighted the transformative potential of generative AI across industries, stating that it “will revolutionise every sector.” However, French cautioned that maintaining such high expectations requires continuous exceptional growth rates.
French also pointed out that while Nvidia’s current AI chip, Hopper, is performing well, the next-generation Blackwell chip has experienced some production delays. This, he suggested, may have contributed to the after-hours sell-off of Nvidia shares on Wall Street.
The announcement of Nvidia's earnings has become a highly anticipated event in the financial world, with Wall Street responding with a frenzy of trading activity. The Wall Street Journal even reported plans for a “watch party” in Manhattan. Jensen Huang, known for his iconic leather jacket, has been nicknamed the “Taylor Swift of tech” due to his growing influence.
Alvin Nguyen, senior analyst at Forrester, noted that both Nvidia and Huang have emerged as the “face of AI.” While this has bolstered the company’s success thus far, it could also pose a risk if AI investments do not yield the anticipated returns, he added. “Having a thousand use cases for AI is not sufficient; there must be a million,” said Nguyen.
Nguyen further acknowledged Nvidia's first-mover advantage, with market-leading products and a robust software ecosystem that customers have relied on for decades. However, he warned that competitors like Intel could potentially erode Nvidia's market share over time if they develop superior products.
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