Shares of U.S. technology companies are falling even though Nvidia, the chipmaker driving the stock market boom sparked by artificial intelligence (AI), reported better-than-expected results.
The company, the darling of the US markets and whose shares have risen 150 percent this year alone, reported second-quarter revenue of just over $30 billion – more than double the amount it generated in the same period a year ago.
NVIDIAThe crucial sales forecast for the current quarter of $32.5 billion also exceeded estimates, but only just.
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This may have been the trigger for the stock to suffer a rare drop in value following the release of earnings figures.
A decline of up to 6.8 percent was recorded in after-hours trading, reported the Reuters news agency.
This built on losses of more than 2% during peak trading hours on Wednesday.
Some major customers such as Meta and Amazon were also affected, but the red figures for both were around one percent.
The performance of Nvidia, which holds 80% of the AI chip market, is being closely watched for signs that the major investment opportunity of AI remains on a solid uptrend.
Confidence began to falter in early August when US data raised fears of a recession and triggered a short-lived but strong global equity sell-off This drove investors towards safe government bonds.
For Nvidia, a recession would be very unlikely, but it would jeopardize demand for AI and thus for its products.
Its prospects and success to date have earned it a proud market value of $3.2 trillion, according to LSEG data.
Jensen Huang is Nvidia’s CEO. Image: AP
Shares have risen 3,000% since 2019.
But Nvidia’s meteoric rise, which has put it just behind Apple in terms of market value, raises fears that it could be a repeat of the dot-com bubble that burst two decades ago.
Technology stocks have outperformed the market and are considered vulnerable to shocks in terms of their value relative to earnings.
Concerns about a design-related delay in the launch of Nvidia’s upcoming Blackwell chips have contributed to recent price fluctuations, but shares have largely held up as the company’s existing Hopper chips have been seen as a way to fill short-term gaps.
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Nvidia said Wednesday that it has already shipped Blackwell pilot models to customers and partners. The company expects sales to increase starting by the end of the year.
Traders in the US stock options market had already expected a price fluctuation of over 300 billion dollars ahead of the publication of the earnings report.
However, analysts believe that the observed price declines could be more likely due to fears about the value issue.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said of the update: “Nvidia continues to defy gravity, beating expectations on both revenue and earnings for the seventh consecutive quarter. This shows masterful performance and leadership from Jensen Huang and the Nvidia team.”
“But early trading suggests that’s not enough to satisfy the market. It’s now less about simply beating estimates, markets are expecting them to be beaten, and it’s the magnitude of today’s beat that seems to have disappointed a little.”
