Shares of chip designer Nvidia have fallen after investors were spooked by signs of slowing growth and production problems, even though the artificial intelligence company reported a 122% increase in second-quarter revenue compared with the same period last year.
The Silicon Valley company’s revenue for the period more than doubled to $30bn (£23bn), beating analysts’ average estimates of $28.7bn. However, investors were concerned by signs of slowing growth, particularly around its next-generation artificial intelligence chips, codenamed Blackwell.
Shares fell as much as 7% in premarket trading before paring losses to 3%. The chipmaker is the world’s third-most valuable company, with a market value of $3.1 trillion.
Nvidia said delivery of its Blackwell chips, which comprise 208 billion transistors that perform calculations to train its large language model, would be delayed by several months from January. Its chief executive, Jensen Huang, had previously said Blackwell would generate “a lot of revenue” for the company this year.
Simon French, chief economist and director of research at investment bank Panmure Liberum, told the BBC: “There were some signs in the numbers that that rate of growth was trying to slow down.
“Its current ‘hopper’ of AI chips is selling well, but the next one, the next-generation Blackwell, has faced some production delays, and that may be one reason Wall Street sold off the stock after hours.”
Speaking to investors and reporters overnight, Nvidia executives did not detail the extent of the delay in Blackwell deliveries but said TSMC, the Taiwanese semiconductor company that makes the U.S. company’s most advanced chips, had fixed the manufacturing issues. They added that the first samples were already being shipped to a small group of customers.
Nvidia’s share price plunge has hit US markets, particularly the S&P 500 index. Nvidia accounts for around 6% of the index’s total value and has helped drive its gains this year, after rising more than 160% in the past 12 months.
Matt Britzman, an analyst at investment platform Hargreaves Lansdown, said Nvidia faces a big challenge in how to live up to expectations. “It’s not just about beating estimates now, markets are expecting them to be beaten, and it’s the magnitude of the beat that seems to have disappointed a little bit.”
While many investors have embraced the theoretical impact of AI, saying it could transform nearly every global industry, French noted that practical use cases are “still unproven.”
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“Expectations are so high for this stock, not just as an individual company, but for its broader economic impact,” he said. “If you’re going to have such high expectations, you have to keep growing at spectacular rates.”
However, Britzman cautioned against reading too much into the market reaction, given that investors tend to “overstate” the significance of a set of quarterly results, particularly in the “grand scheme of AI prospects.” Instead, he said companies such as Microsoft and Tesla, and Facebook and Instagram owner Meta, were working on a “multi-year, even multi-decade time frame, and investors would be wise to adopt a similar mindset.”
He added: “The question of return on investment, which many AI bears “The fact that Nvidia’s biggest customers aren’t considering a product repurchase is not the primary consideration at this stage. Like many before it, this cycle won’t be a straight line, but as long as the “build it and they will come” approach continues, this plays into Nvidia’s hands.”