Nvidia
- Nvidia posted strong second-quarter numbers, more than doubling revenue during the same period last year.
- But the numbers were largely expected as tech companies continue to invest in AI.
- Sky-high expectations are working against Nvidia, experts told BI.
It's hard to be the king of AI.
Nvidia showed that AI demand is still high, more than doubling its revenue for this same period last year and projecting $32.5 billion in revenue for the next quarter.
But that came as no surprise to industry experts on Wednesday.
As large tech companies continue to inject billions of dollars into artificial intelligence, locking in demand for Nvidia's valuable chips, the multitrillion-dollar company was largely expected to post strong quarterly numbers.
And by standard measures, it did.
The company reported $30.04 billion in revenue this quarter, more than doubling its revenue from last year at the same period and beating analyst expectations of $28.86 billion.
But its stock fell 6.9% after hours on Wednesday following the results.
What's working against Nvidia are the sky-high expectations investors keep setting for the Silicon Valley chipmaker, especially as they get antsy over returns on AI investments, analysts and industry experts told Business Insider.
"The numbers are stellar," Jacob Bourne, an analyst for Emarketer, told Business Insider. "The problem is that investors keep raising the bar on Nvidia each quarter, and the expectations have become unrealistic."
Emarketer is a subsidiary of Axel Springer, which also owns Business Insider.
Similarly, Daniel Newman, CEO of The Futurum Group, a tech research firm, told BI that the second quarter numbers Nvidia showed were strong "but that level of good was already priced in" by investors. He described expectations as "almost an irrational exuberance."
Guidance for the current quarter failed to impress some investors as well.
Nvidia projected its third-quarter revenue will be about $32.5 billion, which was lower than investor expectations of a figure closer to $33 billion.
Jefferies analysts deemed that revenue guidance "good, but not good enough" in a Wednesday note.
Chip delays
Questions also loomed over concerns around shipment delays for the company's Blackwell GPUs, which are expected to replace Nvidia's Hopper, ahead of Wednesday's earnings call.
"The recent delay in Blackwell's market release timeline added to investor jitters," Bourne told BI.
On Wednesday's earnings call, Nvidia CEO Jensen Huang promised that the company would be shipping out billions of dollars worth of Blackwell GPUs by the fourth quarter — a metric that analysts warned was vague. Nvidia executives on the call remained vague about the anticipated gains expected from Blackwell despite investor follow-up Qs.
Overall, experts said that Nvidia has largely tempered any concerns around Blackwell shipment delays, but it will be crucial for the company to deliver.
Nvidia's earnings "beat fell short of expectations, which rose sharply into the print but the important point is that the Blackwell delay is in the rearview mirror," the Jefferies analysts wrote.
Logan Purk, a tech analyst at Edward Jones, wrote that Nvidia could struggle to widely beat expectations.
"However, the company should receive a boost with the launch of its new Blackwell chips later this year," he wrote.
Emma Cosgrove contributed to this report.