Nvidia’s AI chipsets remained in high demand during the company’s latest quarter, but the pace of growth was not quite strong enough to fully ease concerns that enthusiasm for artificial intelligence may be cooling.
The results, released Wednesday, were closely watched because Nvidia has become a leading bellwether for the two-year AI boom that has driven much of the stock market’s recent gains. The Silicon Valley chipmaker also made history as the first publicly traded company to reach a $4 trillion market valuation. (All figures in U.S. dollars.)
In recent weeks, however, several research reports and public comments from prominent technology executives have raised investor questions about whether AI-driven growth has been overstated. Nvidia’s latest quarter, covering May through July, offered a mixed answer: strong overall results, but signs that sales of the company’s critical AI processors are not expanding as rapidly as in past quarters.
Data-center chips—essential components in the AI infrastructure being rolled out globally—are grouped within Nvidia’s data center division. That unit posted revenue of $41.1 billion, a 56% year-over-year increase, but slightly below the FactSet consensus estimate of $41.3 billion. Meanwhile, Nvidia reported overall revenue of $46.7 billion, also up 56% from a year earlier, and net income of $26.4 billion, or $1.08 per share—both figures that beat analyst expectations.
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Nvidia forecasts higher revenue for Q3
Looking ahead, Nvidia projected revenue of $54 billion for the August–October quarter—slightly above analyst expectations. “We are in the beginning of the buildout,” CEO Jensen Huang said on the company’s conference call, adding that Nvidia expects another $3 trillion to $4 trillion in cumulative AI investment by the end of the decade. That forecast signals the company’s continued optimism about long-term demand for AI infrastructure.
Still, Nvidia’s stock slipped about 3% in after-hours trading following the earnings release, reflecting investor disappointment that the figures were not more spectacular. After more than a tenfold increase in the company’s share price over roughly two and a half years, expectations had become exceptionally high. “Saying the stock was priced for perfection would be an enormous understatement,” noted Investing.com analyst Thomas Monteiro.
Delivering the level of growth required to push Nvidia to a $5 trillion market valuation is increasingly challenging. The company’s annual sales are forecast to surge from $44 billion in fiscal 2024 to a projected $204 billion in the current fiscal year ending in January, which translates into smaller year-over-year percentage increases. After several quarters in 2023 and 2024 when revenue doubled or tripled year over year, growth rates have moderated over the past four quarters.
China restrictions and the impact on sales
Nvidia’s recent quarterly results were also affected by restrictions that temporarily limited its ability to sell certain AI chips in China. The company expected the constraints to reduce sales by roughly $8 billion during the May–July period, and that expectation had already been priced into investor outlooks. Earlier this month, those restrictions were eased under an arrangement that involves sharing a portion of China sales—officials described a 15% levy tied to the agreement—though the near-term impact on revenue timing remains uncertain.
In an optimistic scenario, Nvidia’s chief financial officer, Colette Kress, has suggested the company could add between $2 billion and $5 billion in China-related AI chip sales as the situation normalizes. How quickly those sales materialize, and how they will influence future quarterly results, continues to be a key consideration for investors.
The wider market has benefited from the AI-driven rally as well. The benchmark S&P 500 has posted substantial gains since late 2022, with AI enthusiasm supporting a large portion of investor optimism. Nonetheless, some market participants have begun to wonder whether the current AI surge could resemble past speculative cycles—most notably the late 1990s dot-com boom and subsequent downturn—raising questions about sustainability and valuation.
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