Nvidia erases $250B in market cap despite strong earnings

Nvidia (NVDA) reported stronger-than-expected earnings during the quarter ending June but stocks of the AI giant fell by over 8%. The company posted earnings per share (EPS) of $0.68, surpassing expectations of $0.65.

The stock reaction has wiped out around $250 billion in market capitalization within minutes of the earnings call. Wall Street now awaits Blackwell, the next-gen AI chip, to hit the markets.

NVDA stock fell by at least 8%

Shares of AI chipmaker Nvidia fell by at least 8% in extended trading, wiping $250 billion in market cap. The market reaction comes after the company reported revenue growth of 122% in Q2. However, it is the smallest margin in the last six quarters, according to Bloomberg.

Ryan Detrick, a chief market strategist at the Carson Group, explained that while Nvidia did well, the increase wasn’t as big as the previous quarters. Detrick told Reuters that Nvidia is a great company “but it appears the bar was just set a tad too high this earnings season.”

Over the past three quarters, Nvidia’s revenue grew by more than 200% each time.  Therefore, it set a very high standard for the chipmaker. However, it might become harder for Nvidia to surpass the expectations it has set. Nvidia’s revenue of $32.5 billion was marginally higher than the average analyst estimate of $31.9 billion but predictions went as high as $40 billion.

Nvidia's Net Income hit another record high at $16.6 billion in Q2. That's a 168% increase over last year's Net Income of $6.2 billion. $NVDAhttps://t.co/l5IYmkeySJ pic.twitter.com/yUlUbJbWHf

— Charlie Bilello (@charliebilello) August 28, 2024

“It’s less about just beating estimates now, markets expect them to be shattered,” Matt Britzman, senior equity analyst at Hargreaves Lansdown, told BBC. Britzman added that investors were expecting a bigger outperformance.

Notably, NVDA shares rose by over 160% in 2024 but investors are now pinning hopes on its delayed next-gen AI chip, Blackwell.

Nvidia says Blackwell has set ‘new standard’

Nvidia said in its latest blog the company’s graphics processing units (GPUs) have performed well with the upcoming Nvidia Blackwell platform demonstrating up to four times the performance of Nvidia’s current top GPU, the H100.

Blackwell’s increased performance is attributed to its use of a second-generation Transformer Engine and FP4 Tensor Cores. Nvidia claims that these advanced features make processing generative AI tasks more efficient and faster.

The company says that due to increased AI demands, Nvidia systems connect multiple GPUs to work together. The chipmakers also say that the second phase of generative AI is now driven by more powerful and advanced open-source AI models.