Nvidia takes $100bn hit as market opens

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Shares in Nvidia fell more than 4 per cent at the open of trading on Thursday as the chipmaker’s latest earnings report failed to live up to Wall Street’s lofty expectations, despite revenue more than doubling in the last quarter.

The declines initially trimmed more than $100bn from the Silicon Valley-based company’s market value, which has soared amid a boom in spending on artificial intelligence.

Shares recovered some ground shortly after the market opened to trade at about 3 per cent down on the previous day. Nvidia’s shares are still up more than 150 per cent since the start of 2024.

In its latest results on Wednesday, the chipmaker said that it anticipates $32.5bn in revenue in the third quarter, plus or minus 2 per cent, just ahead of analysts’ consensus expectations.

However the figure underwhelmed investors who have become accustomed to the chipmaker far outstripping Wall Street’s forecasts in the two years since the launch of ChatGPT.

Revenue in the three months to July 28 was $30bn, up 122 per cent from a year ago and ahead of analysts’ forecasts of $28.7bn.

“The revenue outperformance was the smallest relative to expectations in six quarters, so this wasn’t the sort of massive beat that Nvidia has often reported,” said Deutsche Bank macro strategist Henry Allen.

Nvidia on Wednesday sought to reassure investors that it would see “several billion dollars” in revenue this fiscal year from the next generation of its powerful AI chips, despite hitting production problems.

Chief executive Jensen Huang told the Financial Times that delays to the company’s next-generation AI processor would not derail the chipmaker’s plans to produce a new version of its flagship product every year.

Bank of America analyst Vivek Arya described the share price moves on Thursday as “quarterly noise” and said that Nvidia continued to represent “unique growth at a very reasonable valuation”.

Some analysts believe that the chipmaking giant’s earnings have become as important for US financial markets as the Federal Reserve’s monetary policy decisions due to its position as a “bellwether” for the wider technology industry, according to Jefferies strategist Mohit Kumar.