Nvidia stock falls despite record earnings: Fears of tech bubble grow

The US chip manufacturer Nvidia was able to more than double its revenues to a record high of $30 billion (£22.8 billion) in the last quarter. Nevertheless, the company experienced a massive drop in its stock price, plunging up to 8 percent in after-hours trading. This fuels concerns of a potential tech bubble. The disappointed market reaction occurred despite revenues significantly surpassing the average analyst forecast of $28.9 billion. Nvidia’s revenues have rapidly surged thanks to increasing interest in Artificial Intelligence (AI). The company's chips are considered the most advanced for such applications. Jensen Huang, founder and CEO of Nvidia, said on Wednesday evening: "Nvidia achieved record revenues as global data centers modernize the entire computing ecosystem with accelerated computing and generative AI." Nvidia has risen to become one of the most watched stocks in the world and is seen as a barometer for both the health of the tech industry and the US economy as a whole. Despite the impressive quarterly figures and the announcement of a $50 billion stock buyback program, the stock fell 5.3 percent in after-hours trading. Michael Ashley Schulman, Chief Investment Officer of Running Point Capital, commented on the results as an "indicator for the entire technology sector," which in turn is an "indicator for the rest of the market" since many sectors are increasingly dependent on technology. Nevertheless, Keith Buchanan from Globalt Investments emphasized the uncertainties: "No one knows how long Nvidia can continue to positively surprise, but it cannot go on forever." Nvidia has recorded an astounding stock return of nearly 3,000 percent since 2019, thanks to the strong demand for its graphics processors (GPUs), which are used to train AI bots, including OpenAI’s ChatGPT. Under Huang’s leadership, Nvidia’s market value reached $3 trillion in June, briefly making it the most valuable private company in the world. Elsewhere on Wall Street, stock indices closed mixed: The S&P 500 fell 0.6 percent, the Dow Jones 0.4 percent, and the tech-heavy Nasdaq Composite 1.1 percent. Among the biggest losers were Apple, Microsoft, and Amazon. Another tech company, Super Micro Computer, suffered losses of 19.1 percent following the announcement of a delay in filing its annual report. By the end of the second quarter, Nvidia forecasts revenues of $32.5 billion, once again exceeding Wall Street’s expectations. However, despite this optimistic outlook, the market remains highly cautious and volatile as investors question the sustainability of the recent AI hype.