Nvidia Beats Earnings Expectations, Yet Stock Falls 3.2%. What Happened?
The chipmaker’s shares slipped 3.2% in after-hours trading, erasing about $110 billion from its $4.4 trillion m-cap. The forecast, while still strong, failed to match Wall Street expectations.
Nvidia posted higher revenue and profits in its latest quarter, yet its stock fell on Wednesday as geopolitical tensions cast doubt on the company’s growth outlook. The chipmaker’s shares slipped 3.2 per cent in after-hours trading, erasing about $110 billion from its $4.4 trillion market capitalisation. The decline followed a forecast that, while still strong, failed to match Wall Street’s lofty expectations.
Why the Market Reacted Despite Record Numbers
For the fiscal second quarter, Nvidia reported revenue of $46.74 billion, ahead of analyst estimates of $46.06 billion. The company expects third-quarter revenue of $54 billion, plus or minus 2 per cent—slightly above the consensus forecast of $53.14 billion, according to LSEG, reported Reuters.
Yet the tone of its guidance disappointed investors accustomed to Nvidia smashing forecasts. Data centre revenue reached $41 billion but missed some analyst projections, fuelling speculation that cloud providers may be tempering AI-related spending. Adjusted gross margins for the current quarter were pegged at 73.5 per cent, marginally above the expected 73.3 per cent.
“This is the smallest reaction to an earnings report in Nvidia’s AI incarnation,” said Jake Behan, head of capital markets at Direxion in New York. “While it may not have been a blowout, it’s not a miss.”
The China Factor Looms Large
CEO Jensen Huang acknowledged that sales to China remain uncertain amid ongoing trade tensions between Washington and Beijing. Nvidia has left out potential China shipments from its current forecast, despite receiving limited licences for its H20 chips.
“If geopolitical issues subside and it gets more orders, Nvidia could add $2 billion to $5 billion in H20 revenue next quarter,” said Ben Bajarin, CEO of Creative Strategies. For now, those figures remain off the table.
“Nvidia’s biggest bottleneck isn’t silicon, it’s diplomacy,” said Michael Ashley Schulman, chief investment officer at Running Point Capital. Earlier in May, Nvidia had projected that US export curbs could wipe out $8 billion in quarterly sales.
AI Demand Still Driving Growth
Despite the cautionary outlook, Nvidia remains at the centre of the AI boom. Demand for its advanced chips, essential for generative AI applications, continues to surge. CFO Colette Kress said the company’s “sovereign AI” initiative—selling AI chips and software to governments—is on track to generate $20 billion this year.
Kress also forecast that cloud and enterprise customers will pour $600 billion into AI infrastructure in 2025 alone, potentially rising to $3 trillion–$4 trillion by 2030. Big Tech giants such as Meta Platforms and Microsoft are driving much of this investment, with roughly half of Nvidia’s $41 billion data centre revenue coming from major cloud providers.
Nvidia also revealed that a single non-Chinese customer purchased $650 million worth of H20 chips in the latest quarter, underlining global demand beyond China. The company authorised an additional $60 billion in share buybacks as part of its shareholder return strategy.
Competitive Landscape and Market Mood
Rival Advanced Micro Devices also saw its shares decline by 1.4 per cent following Nvidia’s results. While enthusiasm for AI-linked stocks remains strong, Wednesday’s muted reaction signals investors’ concerns over trade policy risks and the sustainability of hyperscale cloud spending.
As eMarketer analyst Jacob Bourne noted, “The data centre results, while massive, showed hints that hyperscaler spending could tighten at the margins if near-term returns from AI applications remain difficult to quantify.”
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