By Nvidia shares dipped more than 4% in the open Thursday, even as the chipmaking company had better-than-expected second-quarter earnings on both sales and profit. Its decline reflects that there is a crack in the frenetic pace of stocks of makers of AI chips.
Quick facts: Nvidia shares first shed 4.28% and continued to lose value in after-market and pre-market trading, as well. In a 9:55 a.m. Friday trading check, the stock had regained some of its losses to $122.56, down 2.43%. But shares did decline even though Nvidia reported a 122% year-over-year increase in revenue to $30 billion and $16.6 billion in profits outpaced Wall Street's consensus estimate. Nvidia also said it authorized a plan to repurchase $50 billion in shares. But with such a great stock increase of 150% this year, more significant increases were foreseen by analysts which would really bump up the share price.
Nvidia forecast revenue of $32.5 billion for the next quarter, on the low end of the analyst's expectations between $31.9 billion to $37.9 billion. Gross margins also came in somewhat below expectations, guiding to a forecasted range of "mid-70% range" for the year, versus estimated full-year margin of 76.4%.
JJ Kinahan, CEO of IG North America said, "They beat but this was just one of those situations where expectations were so high. I don't know that they could have had a good enough number for people to be happy."
Shares of other semiconductor companies like Broadcom, ARM, Marvell, and Intel all declined after-hours Wednesday before clawing back some of those losses by Thursday morning. Broadcom traded at 158.56, up 0.24%; ARM traded at 125.59, up 0.22%; Marvell traded at 69.04, up 0.88%; and Intel traded at 19.94, up 1.68%. Meanwhile, U.S.-listed shares of TSMC, Nvidia's chip manufacturing partner, opened at 168, down slightly 0.73%.
Nvidia has been among this year's leaders of the broader market rally after shooting higher in the AI chip sector. It's the only one of a few US companies to have ever reached a $3 trillion valuation, joining Apple and Microsoft, while its shares are up 154% this year so far. And some investors still question how long the profits in AI will last, a factor that has weakened the broader chip stock market. Intel's stock sank 29% this summer, after the company disclosed layoffs and weaker-than-expected earnings sparked a global semiconductor selloff that then ricocheted to Nvidia and other leading chipmakers. Some analysts later said the reaction was overblown, but the sector remains volatile.