Nvidia announces record quarterly profits exceeding $26 billion... Why did the stock plummet
Nvidia, the leading American semiconductor company, announced record net profits in the second quarter of this year, more than double what it achieved during the same period last year, but its shares plummeted by 3% following the announcementThe company said it achieved record revenue of $46.7 billion in the second quarter, despite US restrictions on the export of some of its artificial intelligence chips to China.
Nvidia's shares fell more than 3% in after-hours trading following the New York Stock Exchange's close on Wednesday.
What’s happening:-
Shares of Nvidia surged in after-hours trading on Wednesday, following the release of the company’s third-quarter results.
Nvidia shares rise after quarterly earnings report eases bubble fears
What happened:-
The chipmaker posted stronger-than-expected sales and earnings for the quarter.
Nvidia reported record revenues and issued a strong outlook easing widespread concern around an AI bubble with stocks of tech companies soaring in recent months.
How were the results: The Santa Clara, California-based chipmaker reported strong revenue and net income growth for the latest quarter.
Revenues jumped 62% year-over-year to $57.0 billion, beating consensus estimates of $54.88 billion.
Net income grew 65% to $31.91 billion in the quarter.
Earnings came in at $1.30 per share, topping Wall Street expectations of $1.25 per share.
Nvidia is revitalizing global technology markets and dispelling fears of an "AI bubble."
Why it matters:-
Investors have been concerned that the AI boom has driven stock valuations much higher than fundamentals in the tech sector.
The latest results from Nvidia calmed market jitters, after the company reported its 12th consecutive quarter of beating expectations for both revenues and earnings.
Nvidia’s Data Center revenues climbed 66% to a record high of $51.2 billion. Gaming & AI PC revenues grew 30% to $4.3 billion, while Automotive revenues rose 32% to $592 million.
CEO Jensen Huang reiterated that the company had bookings worth $500 billion for its advanced Blackwell and Rubin chips through 2026.
“We’ve entered the virtuous cycle of AI. The AI ecosystem is scaling fast – with more new foundation model makers, more AI startups, across more industries, and in more countries. AI is going everywhere, doing everything, all at once,” Huang said.
Management guided to revenue of $63.70-$66.30 billion for the fourth quarter, above market expectations of $61.48 billion.
Nvidia's record profits
How shares responded:-
Nvidia’s shares jumped 5.1% to $196.00 during the extended trading hours on Wednesday following the release of quarterly results. The stock has surged around 38% over the past six months.
What to watch:-
Investors will continue monitoring strong demand for AI-related infrastructure. Markets will also watch the progress in Nvidia’s plans to invest up to $100 billion in OpenAI.
Given the export restrictions to China, the company is looking for further global expansion, tapping into the Middle East region.