Nvidia stock falls despite beating earnings

The $4 trillion chip behemoth struggles to win over investors amidst fears that the AI train may be running out of track. 

Shares slipped just over 5% after hours, only minutes after the earnings report was released.

Source: Google Finance

They have since partially recovered, stabilising at around -2%.

In the earnings report, Nvidia projected sales within 2% of $54bn for the current quarter, $0.2bn above expectations even while excluding China exports.

Nvidia chose to exclude Chinese revenue due to recent negotiations with the US government over Chinese export restrictions. 

Nvidia’s CFO, Colette Kress, signalled that Nvidia would be waiting until their deal with the US government was on paper before including it in revenue projections. 

Kress also said that once the deal goes through, Nvidia could expect between $2bn and $5bn of its Chinese-specialised H2O chips to ship in a single quarter.

While these numbers are encouraging, this uncertainty surrounding the Chinese market comes at an unfortunate time for Nvidia as investors have been growing cautious of AI-exposed companies due to fears of overvaluation.

This has made investors particularly sensitive to any indication of bad news, hence the sharp sell-off.

On top of this, while their overall revenue beat expectations, Nvidia’s data center division narrowly missed analyst estimates. 

This is concerning for investors because even though other divisions were able to pick up the slack this time, the data center division currently accounts for 88% of the company’s revenue. 

Earnings after earnings it becomes clearer that with sky-high expectations baked in, Nvidia faces the uphill battle of dispelling investor fear of over-valuation and slowing demand.