Nvidia’s earnings report shows the problem of being priced for perfection
Nvidia CEO Jensen Huang delivers a keynote address during the Nvidia GTC Artificial Intelligence Conference at SAP Center on March 18, 2024 in San Jose, California.
Justin Sullivan | Getty Images
Nvidia reported its fourth-straight quarter of triple-digit revenue growth on Wednesday, sailing past estimates on the top and bottom line while also issuing a forecast that topped Wall Street expectations. The company even bolstered its buyback program with a plan to repurchase $50 billion in shares.
But the stock dropped 7% in extended trading.
That’s life for Nvidia, which has ridden the artificial intelligence boom to a $3 trillion market cap, soaring almost nine-fold since the end of 2022 and surpassing every public company other than Apple in valuation. (It topped Apple for a stretch in June.)
In addition to reporting 122% annual revenue growth on Wednesday to over $30 billion, Nvidia said sales in the current period will jump about 80% to roughly $32.5 billion. Analysts were expecting close to $32 billion.
However, Stacy Rasgon, an analyst at Bernstein, told CNBC before the report came out that “buyside whispers” were closer to $33 billion to $34 billion, meaning Nvidia would have to dramatically surpass analyst estimates in its guidance in order to see a pop.
Rasgon, who recommends buying shares of the chipmaker, said there are no indications that demand is waning for Nvidia’s graphics processing units (GPUs), the core infrastructure for developing and running AI models.
“There’s still a ton of demand,” Rasgon said on CNBC’s “Closing Bell.” “They’re still shipping everything that they can sell.”
Nvidia said it expects to ship “several billion dollars” worth of Blackwell revenue in the fiscal third quarter, which ends in October. Blackwell is the company’s latest generation of technology, following Hopper. There had been some concerns that Blackwell would be delayed, but CFO Colette Kress said on the call with analysts that “supply and availability have improved.”
Still, “demand for Blackwell platforms is well above supply, and we expect this to continue into next year,” Kress said.
Other than missing the “whisper” numbers, some investors may be looking at Nvidia’s gross margin, which slipped a bit in the quarter to 75.1% from 78.4% in the prior period. That’s up from 43.5% two years ago and 70.1% in the fiscal second quarter of last year.
For the full year, the company said it expects its gross margin to be in the “mid-70% range.” Analysts were expecting full-year margin of 76.4%, according to StreetAccount.
‘Getting returns right away’
On the earnings call, analysts asked Nvidia executives about customers and whether they’re making money on their investment. Following the company’s prior report, Kress gave investors data points showing that a cloud provider could make $5 over four years selling access to $1 of Nvidia chips.
This time, Nvidia took a different approach. CEO Jensen Huang said on Wednesday’s call that Nvidia’s technology will be taking work away from traditional processors, like those made by Intel or AMD. He also said generative AI would start to do more coding, that companies like Meta can use Nvidia chips for recommender systems, and that nations are starting to buy more chips.
“The people who are investing in Nvidia infrastructure are getting returns on it right away,” Huang said.
Huang also said that next-generation AI models would require “10, 20, 40 times” more computing power, echoing comments recently made by former Google CEO Eric Schmidt.
The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan.
Tyrone Siu | Reuters
“The frontier models are growing in quite substantial scale,” Huang said.
He said Nvidia’s main customers are vying to be first to produce new AI advancements.
“The first person to the next plateau gets to introduce a revolutionary level of AI,” Huang said. “The second person who gets there is incrementally better or about the same.”
But buying into Nvidia at these levels is a bet that the company can continue to outperform very high expectations and requires a willingness to accept the kind of stock volatility generally reserved for much smaller companies.
After reaching a record in June, Nvidia proceeded to lose almost 30% of its value over the next seven weeks, shedding roughly $800 billion in market cap. It’s since recovered most of those losses.
In the past two years, the stock has moved 5% or more in a single day on 50 separate occasions. For Microsoft, that’s happened only six times, which is one more than for Apple. At Meta, it’s happened 21 times. Tesla fans, however, can relate. Shares of the electric automaker have moved at least 5% on more than 70 trading days over that stretch.
One reason for Nvidia’s increased volatility is that it relies on a small group of customers — including those mentioned above — for an outsized amount of its revenue. Top execs at Alphabet and Meta both acknowledged recently that they could be overspending in their AI buildout, but said the risk of underinvesting was too great for them to not be aggressive.
Tesla CEO Elon Musk attends the Saudi-U.S. Investment Forum, in Riyadh, Saudi Arabia, May 13, 2025.
Hamad I Mohammed | Reuters
Tesla’s shares have finally turned positive for the year.
After a dismal first quarter, which was the worst for the stock in any period since 2022, and a brutal start to April, following President Donald Trump’s announcement of sweeping new tariffs, Wall Street has again rallied around the electric vehicle maker.
The stock rose 3.6% on Monday to $410.26, topping its closing price of 2024 by over $6. It’s up 85% since bottoming for the year at $221.86 on April 4. A new filing revealed that CEO Elon Musk purchased about $1 billion worth of shares in the company through his family foundation.
It’s the second straight year Tesla has bounced back after a down first quarter. Last year, the shares fell 29% in the first three months before ending up 63% for 2024.
In recent weeks, analysts have praised the EV maker’s proposed pay plan for Musk, which could amount to a $1 trillion windfall for the world’s richest person over the next decade. The company has also gotten a boost from its new MegaBlocks battery energy storage systems that Tesla ships preassembled to businesses looking to lower their power costs or make greater use of electricity from renewable resources.
Even with the rebound, Tesla is the second-worst performer this year among tech’s megacaps, ahead of only Apple, which is down about 5% in 2025. Tesla is still in the midst of a multi-quarter sales slump due to an aging lineup of EVs and increased competition from lower-cost competitors in China, namely BYD.
Tesla has seen a consumer backlash, in part because of Musk’s political activities, including spending nearly $300 million to propel President Trump back to the White House and his work with the Trump administration to slash the federal workforce.
Tesla leadership has been working to shift investors’ attention to other topics such as robotaxis and humanoid robots.
However, the company has yet to deliver vehicles that are safe to use without a human onboard and ready to take control if needed. And while Musk is touting Tesla’s Optimus robots, which he says will be able to do everything from factory work to babysitting, a product is still a long way from hitting the market.
WATCH: Musk’s share purchase
Google CEO Sundar Pichai gestures to the crowd during Google’s annual I/O developers conference in Mountain View, California on May 20, 2025.
Camille Cohen | Afp | Getty Images
Alphabet has joined the $3 trillion club.
Shares of the search giant jumped more than 4% on Monday, pushing the company into territory occupied only by Nvidia, Microsoft and Apple.
The stock got a big lift in early September from an antitrust ruling by a judge, whose penalties came in lighter than shareholders feared. The U.S. Department of Justice wanted Google to be forced to divest its Chrome browser, and last year a district court ruled that the company held an illegal monopoly in search and related advertising.
But Judge Amit Mehta decided against the most severe consequences proposed by the DOJ, which sent shares soaring to a record. After the big rally, President Donald Trump congratulated the company and called it “a very good day.”
Alphabet shares are now up more than 30% this year, compared to the 15% gain for the Nasdaq.
The $3 trillion milestone comes roughly 20 years after Google’s IPO and a little more than 10 years after the creation of Alphabet as a holding company, with Google its prime subsidiary.
CEO Sundar Pichai was named CEO of Alphabet in 2019, replacing co-founder Larry Page. Pichai’s latest challenge has been the surge of new competition due to the rise of artificial intelligence, which the company has had to manage through while also fending off an aggressive set of regulators in the U.S. and Europe.
The rise of Perplexity and OpenAI ended up helping Google land the recent favorable antitrust ruling. The company’s hopes of becoming a major AI player largely ride with Gemini, Google’s flagship suite of AI models.
Technology
Bessent: TikTok deal ‘framework’ reached with China, Trump and Xi will finalize it Friday
Samuel Boivin | Nurphoto | Getty Images
The U.S. and China have reached a ‘framework’ deal for social media platform TikTok, Treasury Secretary Scott Bessent said Monday.
“It’s between two private parties, but the commercial terms have been agreed upon,” he said from U.S.-China talks in Madrid.
Both President Donald Trump and Chinese President Xi Jinping will meet Friday to discuss the terms. Trump also said in a Truth Social post Monday that a deal was reached “on a ‘certain’ company that young people in our Country very much wanted to save.”
Bessent indicated that the framework could pivot the platform to U.S.-controlled ownership.
TikTok did not immediately respond to a request for comment.
The comments came during the latest round of trade discussions between the U.S. and China. Relations have soured between the two countries in recent months from Trump’s tariffs and other trade restrictions.
At the same time, TikTok parent company ByteDance faces a Sept. 17 deadline to divest the platform’s U.S. business or face being shut down in the country.
U.S. Trade Representative Jamieson Greer said Monday that the deadline may need to be pushed back to get the deal signed, but there won’t be ongoing extensions.
Congress passed a law last year prohibiting app store operators like Apple and Google from distributing TikTok in the U.S. due to its “foreign adversary-controlled application” status.
But Trump postponed the shutdown in January, signing an executive order in January that gave ByteDance 75 more days to make a deal. Further extensions came by way of executive orders in April and in June.
Commerce Secretary Howard Lutnick said in July that TikTok would shutter for Americans if China doesn’t give the U.S. more autonomy over the popular short-form video app.
As for who controls the platform, Trump told Fox News in June that he had a group of “very wealthy people” ready to buy the app and could reveal their identities in two weeks. The reveal never came.
He has previously said he’d be open to Oracle Chairman Larry Ellison or Tesla CEO Elon Musk buying TikTok in the U.S. Artificial intelligence startup Perplexity has submitted a bid for an acquisition, as has businessman Frank McCourt’s Project Liberty internet advocacy group, CNBC reported in January.
Trump told CNBC in an interview last year that he believed the platform was a national security threat, although the White House started a TikTok account in August.
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