Nvidia forecasts third-quarter revenue in line with market, shares fall

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Aug 28 (Reuters) - Nvidia forecast third-quarter revenue largely in line with market estimates on Wednesday, failing to impress investors who have driven a dizzying rally in its shares as they bet billions on the future of generative artificial intelligence.

Shares of the Santa Clara, California-based company fell 5%in extended trading. Nvidia's stock, which closed down 2%, have risen more than 150% so far this year.

Investors had lofty expectations from the chipmaker, following a more than seven-fold surge in Nvidia's shares over the last two years - making it one of the biggest beneficiaries of a rally in AI-linked shares.

The company's capacity to surpass estimates faces increasingly greater challenges as each success prompts Wall Street to raise their targets even higher.

The company forecast revenue of $32.5 billion, plus or minus 2%, for the third quarter, compared with analysts' average estimate of $31.77 billion, according to LSEG data.

Nvidia expects adjusted gross margin of 75%, plus or minus 50 basis points, in the third quarter. Analysts on average forecast gross margin to be 75.5%, according to LSEG data. It reported a 75.7% gross margin in the second quarter versus an average estimate of 75.8%.

Sales in Nvidia's data center segment grew 154% to $26.3 billion in the second quarter ended July 28, above estimates of $25.15 billion. From the first quarter, it increased 16%.

Total second-quarter revenue was $30.04 billion, beating estimates of $28.70 billion.

The company said it expects several billion dollars in revenue from its latest Blackwell chips in the fourth quarter, addressing wide-spread concerns of reported production delays hampering growth.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Arun Koyyur)