Nvidia earnings forecast: Chipmakers fails to impress investors, shares fall 6%, experts think bar set ‘too high’

Nvidia's earnings forecast fell short of investor expectations, leading to a 6% drop in shares. Despite revenue growth and a $50 billion buyback, the results were mixed and failed to meet Wall Street's high targets.

Livemint
Published29 Aug 2024, 07:39 AM IST
Nvidia's revenue and gross margin forecast for the current quarter were not far from analysts' expectations and failed to live up to a recent history of trouncing Wall Street's targets, Reuters reported.
Nvidia’s revenue and gross margin forecast for the current quarter were not far from analysts’ expectations and failed to live up to a recent history of trouncing Wall Street’s targets, Reuters reported.(Reuters)

Nvidia earnings forecast: Wall Street and investors were "unimpressed" by chipmaker Nvidia's quarterly earnings forecast released on August 28, Reuters reported. Despite the growth and profits, the reception of the forecast has been mixed.

Nvidia's shares fell 6 per cent in after-trading hours on August 28, pulling other tech stocks down as well — Advanced Micro Devices (AMD) and Broadcom also fell. Shares of Nvidia's biggest customers — Alphabet, Amazon, Meta Platforms and Microsoft, also dipped less than 1 per cent in after-hours trading on August 28.

On market open today (August 29), if Nvidia's shares continue to fall, the chipmaker is likely to lose $175 billion in market value.

Also Read | Indian stock market: 8 key things that changed for market overnight

Nvidia's Quarterly Forecast

Nvidia expects an adjusted gross margin of 75 per cent, plus or minus 50 basis points, in the third quarter. According to LSEG data, analysts, on average, forecast a gross margin of 75.5 percent. It reported a 75.7 per cent gross margin in the second quarter versus an average estimate of 75.8 per cent.

It forecast revenue of $32.5 billion, plus or minus 2 per cent, for the third quarter, compared with analysts' average estimate of $31.77 billion, according to LSEG data. Q2 revenue was $30.04 billion, beating estimates of $28.70 billion.

Also Read | Wall Street today: Tech-heavy Nasdaq drags US stocks ahead of Nvidia earnings

Bar Set Too High?

Nvidia's stock saw a dizzying rise this year — up over 150 per cent, adding a market value of $1.82 trillion and pulling up the broader S&P 500 to new highs. Investors thus had high expectations for the billions pushed into the generative artificial intelligence (AI) business, it added.

Ryan Detrick, chief market strategist at the Carson Group, felt that the previous results had set the bar high for Nvidia. He said, "Here's the issue: The size of the beat this time was much smaller than we've been seeing. Even future guidance was raised, but again, not by the tune from previous quarters. This is a great company that is still growing revenue at 122 per cent, but it appears the bar was just set a tad too high this earnings season."

The revenue and gross margin forecast for the current quarter were not far from analysts' expectations but did not trump Wall Street targets. For context, in the last three consecutive quarters, Nvidia recorded revenue growth exceeding 200 per cent.

However, the report added that its past success has inflated Wall Street expectations even higher, given the company's “capacity to surpass estimates.”

Also Read | Investors on Edge Before Nvidia Earnings, US Data: Markets Wrap

Investors Fear Rethink on AI-based Funds Rush

Some investors fear that Nvidia's expectations-meeting forecast and "slow payoffs" could lead to a shake-up in the billions being invested into the generative AI space, the report said.

"It's a reflection of growing investor jitters about the long-term viability of the generative AI market, with the entire market seemingly hinging on Nvidia's performance," eMarketer analyst Jacob Bourne told Reuters.

Notably, Nvidia's biggest customers — Alphabet, Amazon, Meta Platforms, and Microsoft — are expected to spend over $200 billion this year, mostly on building AI infrastructure, such as data centres, it added.

 

Also Read | Nvidia: May be millionaires, but work long hours, under ’pressure cooker’ stress

Regulatory Concerns

Nvidia is also facing regulatory scrutiny about its practices. It said that it received requests for information from regulators in the United States and South Korea, on "sales of GPUs, efforts to allocate supply, foundation models and investments, partnerships and other agreements with companies developing foundation models."

Earlier, the company had noted inquiries only from the European Union, the United Kingdom and China.

In July, Reuters reported that France's antitrust regulator was also set to charge Nvidia for alleged anticompetitive practices.

(With inputs from Reuters)

Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

MoreLess
First Published:29 Aug 2024, 07:39 AM IST
Business NewsCompaniesCompany ResultsNvidia earnings forecast: Chipmakers fails to impress investors, shares fall 6%, experts think bar set ‘too high’

Get Instant Loan up to ₹10 Lakh!

  • Employment Type

    Most Active Stocks

    Tata Steel share price

    164.30
    03:58 PM | 7 OCT 2024
    -2.45 (-1.47%)

    Axis Bank share price

    1,150.30
    03:29 PM | 7 OCT 2024
    -27.2 (-2.31%)

    Tata Power share price

    441.05
    03:59 PM | 7 OCT 2024
    -25.65 (-5.5%)

    Bharat Electronics share price

    267.35
    03:59 PM | 7 OCT 2024
    -9.85 (-3.55%)
    More Active Stocks

    Market Snapshot

    • Top Gainers
    • Top Losers
    • 52 Week High

    Coforge share price

    7,209.00
    03:29 PM | 7 OCT 2024
    85.85 (1.21%)

    Eclerx Services share price

    3,030.00
    03:29 PM | 7 OCT 2024
    6.95 (0.23%)

    Dr. Lal Pathlabs share price

    3,460.90
    03:54 PM | 7 OCT 2024
    -33.35 (-0.95%)

    Vijaya Diagnostic Centre share price

    977.25
    03:29 PM | 7 OCT 2024
    -11.7 (-1.18%)
    More from 52 Week High

    Rail Vikas Nigam share price

    450.30
    03:57 PM | 7 OCT 2024
    -42.8 (-8.68%)

    Jubilant Ingrevia share price

    726.45
    03:29 PM | 7 OCT 2024
    -67.8 (-8.54%)

    Railtel Corporation Of India share price

    395.90
    03:50 PM | 7 OCT 2024
    -35.65 (-8.26%)

    Garden Reach Shipbuilders & Engineers share price

    1,536.55
    03:44 PM | 7 OCT 2024
    -122.25 (-7.37%)
    More from Top Losers

    Finolex Industries share price

    294.10
    03:56 PM | 7 OCT 2024
    22.45 (8.26%)

    CG Power & Industrial Solutions share price

    758.75
    03:58 PM | 7 OCT 2024
    39.95 (5.56%)

    Astrazeneca Pharma India share price

    7,775.50
    03:29 PM | 7 OCT 2024
    343 (4.61%)

    Blue Dart Express share price

    8,650.45
    03:44 PM | 7 OCT 2024
    347.05 (4.18%)
    More from Top Gainers

    Recommended For You

      More Recommendations

      Gold Prices

      • 24K
      • 22K
      Bangalore
      77,675.00-10.00
      Chennai
      77,681.00-10.00
      Delhi
      77,833.00-10.00
      Kolkata
      77,685.00-10.00

      Fuel Price

      • Petrol
      • Diesel
      Bangalore
      102.86/L0.00
      Chennai
      100.75/L0.00
      Kolkata
      104.95/L0.00
      New Delhi
      94.72/L0.00

      Popular in Companies

        HomeMarketsloanPremiumMint Shorts