Nvidia Stock Falls After Company Crushes Earnings, Soaring AI Chip Demand

The semiconductor company reported October quarter adjusted earnings per share of $4.02, compared to Wall Street’s consensus estimate of $3.37, according to FactSet. Revenue of $18.1 billion was above analyst expectations of $16.2 billion.

Nvidia’s
(ticker: NVDA) data center revenue surged in the October quarter to $14.5 billion, up 279% from the prior year and up 41% from the prior quarter.

The outlook was also robust. For the current quarter, Nvidia provided a revenue forecast range that, at the midpoint, was $20 billion. That’s above the consensus of $18.0 billion.

“Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI,” Nvidia CEO Jensen Huang said in the press release. “NVIDIA GPUs, CPUs, networking, AI foundry services and NVIDIA AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off.”

In Wednesday morning trading, the stock was down 3% to $484.24.

The company’s sales to China and other destinations that are affected by the U.S. government’s export restrictions are expected to “decline significantly” in the current quarter, Chief Financial Officer Colette Kress said in written commentary that accompanied the earnings report. However, Kress said the shortfall would be “more than offset” by strong demand from other geographic regions.

The small reaction in the company’s stock price following the numbers may be because of the big rally into the earnings report. Nvidia stock is up 23% this month and up more than 240% for the year.

Nvidia dominates the market for chips used for AI applications, making it the primary beneficiary of the AI trend. Its GPUs are well-suited for the parallel computations needed to train AI models and serve customers.

The company’s current high-end H100 became available in volume earlier this year and quickly became the technology industry’s most precious resource as rising excitement over generative artificial intelligence created product shortages.

Earlier this month, Nvidia announced its next major AI chip, named the H200 Tensor Core GPU, which is scheduled to be released in the second quarter of 2024. It could create a new wave of demand.

The company is also starting to release chips at a faster pace. In October, Nvidia updated its investor presentation, showing that the chip maker is moving from its previous two-year product cycle to a one-year cadence for AI chips. A slide in that document shows Nvidia planning to release additional high-end AI products in 2024 and 2025.

Write to Tae Kim at [email protected]