Nvidia shares fell yesterday, despite the chip giant posting better-than- expected financial results and its boss declaring it ready to cash in on a multi-trillion dollar artificial intelligence (AI) boom.
The stock slipped by nearly 3 per cent in early trading, knocking more than £90billion off its valuation, amid jitters about whether markets are heading for a tech crunch and worries about sales in China.
It later partly recovered to a figure 0.5 per cent lower.
Nvidia’s second-quarter results, published late on Wednesday, beat analyst expectations with profit of £19.5billion, up 59 per cent year-on-year, and revenue of £34.5billion, up 56 per cent.
Chief executive Jensen Huang dismissed concerns about an end to a surge in spending on the AI chips that have fuelled its rapid growth.
‘A new industrial revolution has started,’ he said, adding: ‘The AI race is on.’
Chip shop: Nvidia boss Jensen Huang (pictured) dismissed concerns about an end to a surge in spending on the AI chips that have fuelled its rapid growth
Huang said Nvidia expects companies to spend up to £3trillion on AI infrastructure by the end of the decade.
Yet the bullish update failed to drive a further rally in the shares, which have nearly doubled in value since the start of April.
And the wider US stock market, which has been buoyed by the AI boom, saw choppy trading. The tech-heavy Nasdaq initially fell before recovering ground and it was a similar story for the S&P 500 and Dow Jones.
Nvidia’s slide was attributed to a third-quarter sales forecast that excluded revenue from China, a market which has been caught up in political tensions between Washington and Beijing.
Huang has struck a deal with US president Donald Trump for export licences to China in exchange for handing over 15 per cent of sales of AI chips to the country to the government.
Nvidia’s value has risen tenfold over the past two-and-a-half years, turning it into the world’s most valuable company, worth more than £3trillion.
It has been the biggest winner in a stellar rally for tech giants involved in the AI race. Yet concerns have grown recently that investor enthusiasm for AI may have been overdone.
Sam Altman, boss of ChatGPT maker OpenAI, recently suggested the market was in a bubble, with investors ‘over-excited about AI’.
Dan Coatsworth, investment analyst at AJ Bell, said yesterday: ‘AI demand is not the problem for Nvidia.
‘It’s more how politics has got in the way of its grand ambitions for global domination. The company is stuck between a rock and a hard place.
Nvidia has technology that countless companies are queuing up to buy, yet the US trade war has made it difficult to sell whatever it wants into China.’
Thomas Hayes, chairman at Great Hill Capital, said: ‘[China] is a big part of their business and until that’s resolved, there’s going to be a bit of an overhang on what they can do in terms of guidance and what they can project in terms of growth.’
But Vivek Arya, research analyst at the Bank of America, advised clients in a note to ‘ignore China noise’.
‘We believe it remains solidly positioned to maintain its 80 per cent-plus share in the fastest-growing and most attractive global AI infrastructure buildout,’ Arya said.
He said that while the Chinese market ‘remains an uncertainty’, this would be ‘more than offset’ by the strength of demand in the rest of the world.
DIY INVESTING PLATFORMS
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
Compare the best investing account for you