Nvidia had another explosive quarter: here’s why its stock price fell

Nvidia (NVDA) retains its title as the darling of the AI ​​revolution, at least for now. The Santa Clara, Calif.-based chipmaker yesterday (Nov. 20) reported record revenue for the July-September quarter, which exceeded Wall Street’s already high expectations. Demand for Nvidia’s AI chips continues to skyrocket, according to the company’s CEO Jensen Huang. “The AI ​​era is upon us and it is vast and diverse,” Huang said during an earnings call.

Nvidia’s quarterly revenue jumped 94 percent to $35 billion while net profit more than doubled to $19.3 billion. Before the AI ​​boom, Nvidia’s graphics processing units (GPUs) were the most widely used by the video game industry. Today, the company’s data center business, which primarily serves AI customers, accounts for nearly 90% of its total revenue, bringing in $30.7 billion for the quarter, up from $14.5 billion billion dollars last year. Gaming revenue, meanwhile, came in at $3.2 billion. The rest of the company’s sales came from its automotive and professional visualization departments.

Huang said demand for Nvidia’s new Blackwell GPUs, which began shipping this month, “is very strong” and production is “full throttle.” In recent months, Nvidia has struggled to meet demand for its Hopper chips.

Why is Nvidia stock down?

Despite an explosive quarter, Nvidia’s stock price fell nearly 2% after the earnings release. Some investors were spooked by the chipmaker’s fourth-quarter revenue forecast of $37.5 billion, which would represent a slowdown from the rapid growth seen in previous quarters. The “conservative revenue forecast” is “a bit disappointing,” Kathleen Brooks, an analyst at brokerage XTB, said in a note to investors.

The company’s customer base is also increasingly concentrated. Cloud service providers, including Amazon Web Services, accounted for about half of Nvidia’s data center revenue, up from 45% in the same period a year ago. Nvidia’s reliance on this sector “could be a slight cause for concern” in the future, according to Brooks.

While some in the tech industry have also raised concerns that improvements in AI models are plateauing, Huang remains optimistic about their scaling potential. “Pre-training scaling is intact and continuing,” the CEO said, adding that research into test-time computing has also emerged as an additional and promising scaling method. “As a result, the demand for our infrastructure is really strong. »

Nvidia expects the AI ​​hype to continue as the company adopts the technology. In addition to predicting that machine learning will eventually replace coding, Huang noted that data centers around the world are being retrofitted into “AI factories” that will generate AI “just like us we produced electricity. The early foundations of an AI-driven world are already evident in developments such as the adoption of AI agents in workplaces and breakthroughs in physical AI, Huang said. “We hope that this growth, this modernization and the creation of a new industry will continue for several more years. »