Global tech stocks fall amid broad declines in the region after Nvidia stock results

Nvidia stock once again surpassed Wall Street’s expectations in its latest earnings report on Wednesday, but for a company that has experienced explosive growth over the past two years, even stellar numbers may no longer be enough to keep investors impressed.

The AI chipmaker, whose stock has fueled a major market rally this year, reported over $30 billion in sales for its fiscal second quarter—a 122% increase from the same period last year and above analysts’ expectations of $28.7 billion. Profits also soared, reaching $16.6 billion, surpassing the $15 billion projection.

Nvidia also offered slightly better-than-expected sales guidance for the current quarter, a positive sign for investors. However, despite the strong results, Nvidia stock shares fell by as much as 5% in after-hours trading.

The company’s cutting-edge AI processors have been pivotal in the recent AI boom, driving demand across the tech sector and sparking a frenzy on Wall Street. Nvidia shares have surged 154% this year and over 3,000% in the past five years, propelling its market value above $3 trillion—making it one of only three U.S. companies to achieve this milestone.

However, questions are emerging about the sustainability of the AI hype, especially regarding when and how the technology will translate into profits for tech giants. Moreover, Nvidia’s extraordinary growth pace is difficult to maintain. While the company exceeded Wall Street’s expectations for revenue and profit, investors seemed disappointed that the margin wasn’t wider. Concerns about potential delays in Nvidia’s latest AI chips, called Blackwell, had also weighed on sentiment, though executives confirmed during the earnings call that Blackwell is still expected to generate revenue this fiscal year.

“While the numbers show that the AI revolution is still thriving, the narrower beat compared to previous quarters adds to a growing list of cautionary signals in the tech space,” said Thomas Monteiro, a senior analyst at Investing.com.

Nvidia CEO Jensen Huang addressed these concerns in an interview with Bloomberg, saying that demand for Blackwell “far exceeds its supply,” but assured that more supply would be available starting in Q4.

Nvidia’s performance has significant implications for the broader market, given its substantial 7% weight in the S&P 500. The company’s earnings have become “the world’s most important financial news event,” noted Bespoke Investment Group.

Despite investor jitters, Nvidia’s business remains strong, especially in its data center segment, which continues to drive growth. Data center sales accounted for nearly $26.3 billion, or 87% of the company’s total revenue, underscoring the persistent demand for AI infrastructure in tech.

“The company benefits from a unique market paradox: Big Tech’s aggressive AI investments drive enormous demand for Nvidia’s chips, even as these companies work on developing their own,” said Emarketer technology analyst Jacob Bourne.

Tech giants like Google, Microsoft, and Meta are expanding their AI investments, much of which goes towards purchasing Nvidia chips. Recently, Google, Microsoft, and Meta all announced increased AI spending in their own earnings reports, with Meta raising its capital expenditure guidance, Microsoft planning to spend more in fiscal 2025 than the $56 billion in 2024, and Google projecting over $12 billion in capital expenditures each quarter this year.

Despite some concerns over potential Blackwell delays, research firm Third Bridge estimates that by the end of next year, 60-70% of AI model training at major cloud providers like Microsoft and Google will rely on Nvidia’s new chips.

On a call with analysts, Nvidia’s CEO emphasized that the company’s chips power much more than just AI chatbots—they support a wide array of applications including ad targeting, search engines, robotics, and recommendation algorithms that drive social media feeds.

“Investing in Nvidia infrastructure yields immediate returns,” Huang said, noting that the company’s advanced chips process data more efficiently, offering cost savings to clients. “In the future, every data center will have GPUs,” referring to the type of chip Nvidia has become renowned for.

Even if the stock’s hype eventually cools down, Nvidia’s strong fundamentals are expected to keep it well-positioned in the years ahead.