Nvidia delivered another quarter of rapid growth, yet its stock slipped as investors focused on areas that missed lofty expectations and on unresolved China uncertainties.
Big beat, cool reception
The chipmaker reported second-quarter revenue of $46.74 billion, up 56% year over year, with earnings per share of $1.08 and gross margins climbing to 72.4%, up from 61% last quarter. According to Fortune, shares fell more than 3% in after-hours trading and traded lower premarket as Wall Street fixated on a narrow miss in data center revenue relative to the most optimistic forecasts.
“The miss on data center revenue weighs on the name in spite of the broader beat,” said Ryan Lee, senior vice president of product and strategy at Direxion. Nvidia guided to $54 billion in revenue next quarter; some traders had hoped for as much as $63 billion, Lee noted. Jake Behan, Direxion’s head of capital markets, said the company is “priced to perfection,” and that anything short of exceptional can disappoint.
Investor expectations shift
Fortune reported that investors may be reassessing how they view AI-driven growth amid bubble concerns and signs of heightened scrutiny. Melissa Otto, head of visible alpha research at S&P Global, said expectations are high and the valuation “is not cheap.” She added that guidance was in line on sales but slightly below on margins, and that comments about ramping expenses could lead margins to flatline or compress in the second half, muting near-term earnings growth.
China uncertainty clouds the outlook
Regulatory uncertainty in China weighed on sentiment. Fortune noted that Nvidia recorded no H20 sales to China in the quarter because a proposed 15% revenue-sharing arrangement tied to export licenses has not been codified, despite some customers receiving licenses in recent weeks. The company estimated it could ship $2 billion to $5 billion in H20s next quarter if restrictions ease, but it did not include that in guidance.
Nvidia has warned in filings it may be effectively blocked from China’s data center market without regulatory approval, while facing rising competition from domestic chipmakers. CEO Jensen Huang described China as a $50 billion market this year and characterized U.S. approval to bring Blackwell chips to China as a “real possibility,” Fortune reported.
“China’s situation is a reminder that no matter how strong a company is, macro forces still matter,” said Kate Leaman, chief market analyst at AvaTrade.
