Nvidia’s latest earnings report delivered mixed signals for investors, raising questions about the short-term outlook for the artificial intelligence (AI) trade, even as long-term momentum remains intact.
The chipmaker posted stronger-than-expected fiscal second-quarter earnings and issued an upbeat revenue forecast for the current quarter. However, shares slid in after-hours trading after data center revenue—widely seen as the company’s growth engine—came in just below Wall Street’s consensus.
Data center growth remains strong despite forecast miss
Despite the disappointment, Nvidia’s data center revenue still surged 56% year-over-year, accounting for 88% of total sales. The company confirmed it did not sell its H20 processors to Chinese customers during the quarter, but released $180 million in inventory to a client outside China.
According to Gene Munster, co-founder of Deepwater Asset Management, the apparent miss may reflect analysts’ forecasting methods more than Nvidia’s actual performance. He noted that tighter U.S. export restrictions on chip sales to China likely distorted the revenue figures.
“I wouldn’t be surprised to see the stock trade higher in Thursday’s session as investors recognize that the miss doesn’t point to deeper issues with the AI trade,” Munster said.
Indeed, by Thursday morning, Nvidia shares had recovered most of their overnight losses, trading less than 2% lower.
Implications for the AI trade
Nvidia’s results are widely regarded as a barometer for the broader AI sector. After a two-year rally fueled by rising adoption of AI technologies, investor enthusiasm has cooled in recent weeks. Shares of Nvidia and the VanEck Semiconductor ETF (SMH) have both shown limited movement since early August.
Munster cautioned that while the report does not offer a “resounding reassurance” to AI-focused investors, it also does not undermine the structural growth story behind the trade.
“The noise is there, but you have to work harder to get to the core of what’s happening,” he said.
Looking ahead
With AI now firmly embedded in both market sentiment and corporate strategies, Nvidia’s earnings remain a critical touchpoint for investors gauging the sustainability of the current boom. The company’s ability to navigate shifting regulatory landscapes and sustain data center growth will be closely watched in the quarters ahead.
