Nvidia shares take fresh hit as growth expectations disappoint

Nvidia, the chipmaker driving the boom in artificial intelligence (AI), has seen fresh falls in its share price following an earnings report amid continued supply chain constraints.

Its third quarter trading update showed demand for its top generative AI chips would continue to outstrip supply for at least a year.

Some would argue it is a nice problem to have but those curbs on revenue have been widely blamed for Nvidia failing to smash market expectations for revenues this year, holding back its performance.

Nvidia said revenues came in at just above $35bn over the three months – above the $33bn consensus, according to LSEG data.

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The company, which has topped the rankings for the most valuable listed firm several times since late spring, has enjoyed an unprecedented increase in its share price, which began in earnest during 2023.

But despite shares performing well – they are up by 190% in the year to date and nine-fold over two years – they have endured more of a rocky ride over the second half of 2024.

That is because investors have fretted over the prospects for AI, competition to Nvidia and delays to its next generation Blackwell chips.

Nvidia values took a surprise fall despite bumper earnings figures for the first six months of its financial year and plunged further when widespread US market jitters set in at the beginning of September over the prospects for the US economy.

Fears that tech stocks were overvalued also contributed.

Nvidia boss Jensen Huang said on Wednesday of sales: “The age of AI is in full steam, propelling a global shift to NVIDIA computing.

“Demand for Hopper and anticipation for Blackwell – in full production – are incredible as foundation model makers scale pretraining, post-training and inference,” he said of the chips.

Market analysts noted, ahead of the earnings update, that a positive share price reaction would depend on the revenue guidance not only being smashed but the outlook being broadened.

They also sought reassurance that Blackwell’s rollout was seen to be on track to help justify the more recent share price recovery, one that tech has seen more generally since Donald Trump’s US presidential election victory was declared.

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One of the bottlenecks for Nvidia’s chip supply has been the limited capacity for advanced production techniques at its manufacturing partner TSMC.

The revenue guidance for the fourth quarter was put at $37.5bn compared to a $37bn figure anticipated by market forecasts.

Shares were down by more than 2% in after-hours dealing, following a decline during regular Wall Street hours.