AI chip giant Nvidia shares fall despite record sales

Shares in Nvidia have dropped despite the company exceeding expectations with a significant increase in sales.

Nvidia reported record revenues of $30 billion (£24.7 billion) for the most recent three-month period, more than doubling its sales.

As a major beneficiary of the AI boom, Nvidia’s market value had surged to over $3 trillion.

However, Simon French, head of research at Panmure Liberum, noted that while Nvidia has consistently delivered impressive sales growth, the latest results suggest that the pace of growth may be slowing.

Analysts had projected sales of $28.7 billion for the three months ending July 28.

Nvidia exceeded this estimate with a 122% increase in revenues compared to the same period last year. Despite this strong performance, Nvidia’s share price fell by 6% in after-hours trading in New York.

“It’s less about just beating estimates now,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “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.”

But Mr French told the BBC: “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 which sends Wall Street into a frenzy of buying and selling shares.

A “watch party” had been planned in Manhattan, according to the Wall Street Journal, while Mr Huang, famed for his signature leather jacket, has been dubbed the “Taylor Swift of tech”.

Alvin Nguyen, senior analyst at Forrester, told the BBC 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.”

Mr. Nguyen highlighted that Nvidia’s first-mover advantage has positioned it with market-leading products and a well-established software ecosystem, which its customers have relied on for decades.

He noted that while rivals like Intel could potentially erode Nvidia’s market share by developing superior products, achieving this would take time.