Nvidia’s earnings report shows problems with perfect pricing | Real Time Headlines

NVIDIA On Wednesday it reported its fourth consecutive quarter of triple-digit revenue growth, Exceeded expectations ’s top and bottom lines, while also issuing forecasts that beat Wall Street expectations. The company has even beefed up its buyback program Plans to repurchase US$50 billion in shares.

But the stock fell 7% in after-hours trading.

This is life at Nvidia, which has ridden the artificial intelligence craze to its peak. $3 trillion market capitalizationSince the end of 2022, the stock price has soared nearly ninefold, and its valuation exceeds that of every public company except Apple. (It briefly surpassed Apple in June.)

In addition to reporting a 122% rise in annual revenue to more than $30 billion on Wednesday, Nvidia said sales would jump about 80% in the current period to about $32.5 billion. Analysts expected closer to $32 billion.

However, Bernstein analyst Stacy Rasgon told CNBC ahead of the report that “buyer whispers” were closer to $33 billion to $34 billion, meaning Nvidia would have to significantly exceed analyst expectations in its guidance to see growth.

Rasgon, who recommends buying shares of the chipmaker, said there are no signs that demand for Nvidia’s graphics processing units (GPUs), the core infrastructure for developing and running artificial intelligence models, is waning.

“Demand is still huge,” Rasgon said on CNBC’s “Closing Bell.” “They’re still shipping everything they can sell.”

Nvidia said it expects Blackwell’s revenue to reach “billions of dollars” in its fiscal third quarter, which ends in October. Blackwell is the company’s latest generation of technology after Hopper. There were concerns Blackwell would be delayed, but Chief Financial Officer Colette Kress said on a conference call with analysts that “supply and availability have improved.”

Still, “demand for the Blackwell platform is much higher than supply, and we expect that to continue into next year,” Kress said.

In addition to missing the “whisper” data, some investors may also focus on Nvidia’s gross profit margin, which fell slightly to 75.1% in the quarter from 78.4% in the previous period. This is up from 43.5% two years ago and 70.1% in last year’s second fiscal quarter.

The company said it expects full-year gross profit margin to be “around 70%.” Analysts expected full-year profit margins of 76.4%, according to StreetAccount.

On the earnings call, analysts asked Nvidia executives about the state of their customers and whether their investments were making money. According to the company’s previous reports, Kress provided investors with data points Display cloud providers can earn $5 over four years by selling $1 worth of Nvidia chips.

This time, Nvidia took a different approach. Chief Executive Jensen Huang said on a conference call Wednesday that Nvidia’s technology will replace jobs performed by traditional processors, such as those powered by Intel or AMD. He also said that generative artificial intelligence will start to do more coding, companies like Meta can use Nvidia chips as recommendation systems, and countries will start to buy more chips.

“People investing in Nvidia’s infrastructure are seeing immediate returns,” Huang said.

Huang also said that the next generation of artificial intelligence models will require “10, 20, 40 times” more computing power, echoing recent comments. Former Google CEO Eric Schmidt.

“Frontier models are growing at a considerable scale,” Huang said.

He said Nvidia’s major customers are scrambling to develop new artificial intelligence technologies.

“The first person to get to the next platform will introduce revolutionary levels of artificial intelligence,” Huang said. “The second person to get there will gradually get better or about the same.”

But buying Nvidia at these levels is a bet that the company can continue to beat very high expectations, and requires a willingness to accept stock volatility typically reserved for much smaller companies.

After hitting a record high in June, Nvidia lost nearly 30% of its market value over the next seven weeks, wiping out about $800 billion in market value. The company has since recouped most of its losses.

Over the past two years, the stock has gained 5% or more in a single day on 50 different occasions. for Microsoftthis happened only six times, compared to apple. exist Yuanthis has happened 21 times. Tesla However, fans can understand. During that time, the electric car maker’s shares have risen at least 5% in more than 70 trading days.

One reason for Nvidia’s increased volatility is that it relies on a small group of customers — including the ones mentioned above — for much of its revenue. Senior managers are in letter He Yuandu recently admitted They may be overspending on AI, but say the risks of underinvesting are too great not to be aggressive.

watch: Nvidia’s latest report ‘basically in the middle’