Nvidia, a leading artificial intelligence company, delivered impressive second-quarter results after the market closed on Wednesday. The company reported non-GAAP earnings of 68 cents per share and revenue of $30.04 billion, surpassing Wall Street’s expectations of 64 cents and $28.68 billion, respectively. However, despite the strong performance, Nvidia’s stock price fell in premarket trading on Thursday.
The primary concern for investors was a slight sequential decline in the company’s non-GAAP gross margin, which slipped 3.2 points to 75.7%. Nvidia attributed this dip to inventory provisions for low-yielding Blackwell material and a higher mix of new products within its data center business. Nevertheless, the company maintained its full-year non-GAAP gross margin guidance in the mid-70% range.
Nvidia also provided optimistic third-quarter revenue guidance of $32.5 billion, plus or minus 2%, surpassing the consensus estimate of $31.69 billion. Furthermore, the company announced an additional $50 billion stock buyback program.
Despite the positive earnings and guidance, investors remained apprehensive. Some analysts attributed the sell-off to a smaller-than-expected guidance variance compared to the consensus, which had been anticipated by many investors.
The potential delay of the Blackwell 200 product launch, although not clarified by management, also contributed to investor concerns. Analysts speculated that the release could be pushed back by at least two months.
The decline in Nvidia’s stock price impacted the broader chip ecosystem, with semiconductor, chip-equipment makers, and suppliers experiencing significant losses. Notable companies affected include Advanced Micro Devices (AMD), Super Micro Computer (SMCI), Taiwan Semiconductor Manufacturing Company (TSM), Micron Technology (MU), Broadcom (AVGO), Marvell Technology (MRVL), Arm Holdings (ARM), and the iShares Semiconductor ETF (SOXX).
Nvidia’s CEO, Jensen Huang, has highlighted a $1 trillion opportunity in the generative AI shift, emphasizing the importance of accelerated computing in data centers. This underscores the company’s commitment to driving innovation and growth in the rapidly evolving AI landscape.
