Nvidia Fails to Satisfy Lofty Investor Expectations for AI Boom

Nvidia Corp. investors gave a cool reaction to its latest quarterly report, which blew past average analysts’ estimates but failed to satisfy the loftier expectations of shareholders who have bet heavily on an artificial intelligence boom.

Revenue in the current period will be about $20 billion, the world’s most valuable chipmaker said Tuesday in a statement. Though that topped the average Wall Street prediction of $17.9 billion, some projections reached as high as $21 billion.

The shares fell 3% to $484.42 in New York on Wednesday, the biggest intraday drop in three weeks.

While Nvidia posted another quarter of impressive growth, some investors were clearly anticipating more. They have poured money into the stock this year — sending it up 242% — on the hopes that the AI industry will continue to bring explosive sales gains for Nvidia. That means Nvidia shares were priced at a level that required an absolutely perfect outcome, analysts have said.

Setting aside the outsized expectations, “Nvidia’s results continue to be astounding,” Wolfe Research analyst Chris Caso said in a note to clients. The numbers are particularly impressive given that US restrictions on China are hurting sales, he said. Moreover, Nvidia announced new chips designed for China on Tuesday that could help that market rebound, he noted.

Nvidia shares had closed at $499.44 in New York on Tuesday before the report. The company has been the best-performing stock on the Philadelphia Stock Exchange Semiconductor Index this year, sending its valuation to more than $1.2 trillion.

In fact, Nvidia’s market capitalization is now more than $1 trillion bigger than that of rival Intel Corp., which until recently was the world’s largest chipmaker.

nvidia best performing chip stock this year

Nvidia Chief Executive Officer Jensen Huang has parlayed a prowess in graphics chips into a leading role in what he calls accelerated computing. The company’s processors, which crunch more data by performing calculations in parallel, have become the go-to tool for training AI services.