Nvidia's stock dropped five percent despite reporting record profits and revenue in its latest quarterly report. Analysts interpreted this situation as a sign of ongoing concerns about an artificial intelligence bubble, indicating that investors are seeking more.
According to Redaksiya, shares of Nvidia, the world's largest company, declined on Thursday despite the announcement of record profits and revenue in the last quarter. This situation was assessed as a worrying sign of continued concerns about an artificial intelligence bubble, despite the chip manufacturer's positive results.
Noteworthy points:
Nvidia shares fell 5.4 percent on Thursday, February 26, to approximately $184.89, marking the stock's largest single-day drop this year.
Nvidia reported quarterly revenue of $68.1 billion and earnings per share of $1.62 on Wednesday. These figures surpassed analyst expectations of $66.1 billion and $1.54, respectively, according to FactSet. Data center revenue reached a record $62.5 billion, up 75 percent year-over-year.
The company also forecast revenue of $78 billion for the current fiscal quarter, significantly higher than analysts' estimate of $72.6 billion.
The decline in Nvidia's shares after its earnings report surprised economists. While Morgan Stanley analysts described Nvidia's report as "the biggest and most accurate expectation beat and upward revision in its sector's history" in a note, HSBC suggested that despite the company's strong results, investors might be experiencing a "lack of new stories."
JPMorgan analysts stated, "The stock's reaction shows investors want more," adding that the decline could be related to "ongoing uncertainty" about the growth of Nvidia's data center business.
Forbes Valuation: Nvidia CEO Jensen Huang owns approximately a 3 percent stake in the company. Based on Thursday's stock price, Huang's net worth decreased by $9 billion to $160.5 billion. According to Forbes' Real-Time Billionaires list, Huang is the eighth richest person in the world, positioned immediately ahead of Amancio Ortega with a net worth of $149.2 billion and behind Bernard Arnault with a net worth of $173.2 billion.
Background: Investor and analyst concerns about a potential artificial intelligence bubble, which could lead to an overvaluation of stocks, have persisted for the past year. In a credit investor survey released earlier this week by Bank of America, 23 percent of participants reported artificial intelligence bubble concerns as their top worry, up from 9 percent in December. In a separate Bank of America fund manager survey conducted earlier this month, approximately 30 percent expressed concerns that increased spending on AI could lead to a credit crisis. Alphabet, Amazon, Meta, and Microsoft have forecast a combined spending of $610 billion for the year. Each of the major tech companies, known as the Magnificent Seven, has highlighted the growing demand for AI products.
Wedbush Securities analysts wrote this week that capital expenditure forecasts have exceeded expectations, while Cantor Fitzgerald noted that investor concerns about AI spending persist despite the "insatiable" demand for the computing power provided by Nvidia.