New York, USA – Investors in chip designer Nvidia have expressed concerns over signs of slowing growth and production issues, leading to a drop in the company’s share prices despite reporting a significant increase in second-quarter revenues. Nvidia, known for its artificial intelligence technology, saw its revenues more than double to $30 billion, surpassing analyst estimates of $28.7 billion. However, worries about a slowdown in growth, particularly related to its next-generation AI chips, codenamed Blackwell, have caused unease among investors.
The stock initially plummeted by 7% in pre-market trading, eventually falling by 2% during early trading on the Nasdaq in New York. The delay in the delivery of Blackwell chips, containing 208 billion transistors crucial for training large language models, has contributed to the concerns. Nvidia’s CEO, Jensen Huang, previously anticipated substantial revenue generation from Blackwell this year.
Although manufacturing issues with Blackwell chips have been addressed by Taiwanese semiconductor firm TSMC, leading to the shipment of early samples to select customers, the company’s stock decline has negatively impacted the US markets, especially the S&P 500 index. With Nvidia representing about 6% of the index’s total value, its performance has played a significant role in the market’s gains over the past year.
Analysts like Matt Britzman from Hargreaves Lansdown highlight the challenge Nvidia faces in meeting high market expectations. The demand for exceeding estimates has placed pressure on the company to deliver exceptional results, with any slight disappointment being magnified. The real-world applications of artificial intelligence, despite its transformative potential, are yet to be fully realized, creating uncertainty among investors.
While acknowledging the inevitable fluctuations in stock performance, Britzman emphasizes the importance of a long-term perspective when evaluating companies in the AI sector. He suggests that focusing on companies like Microsoft, Tesla, and Meta, which operate on a multi-year or multi-decade timeline, may provide a more sustainable investment approach. The cyclical nature of the industry, combined with ongoing innovation efforts, aligns with Nvidia’s strategic position in the market.