NVIDIA Corporation (NASDAQ: NVDA) stock has fallen 10% since the chipmaker released its third-quarter earnings report last week. Here’s what happened:
Analysts point out that the stock price had a post-earnings reaction. NVIDIA Corporation (NASDAQ: NVDA) reported impressive quarterly results with revenue of $35 billion and 94% year-over-year growth. The company’s data center business grew even faster, increasing 112% due to strong AI demand. Net income doubled to $20 billion, and the company gave another solid outlook for the quarter, slightly beating Wall Street expectations. Looking at the numbers, the initial drop in stock prices may have been a profit-taking move. After all, the stock has roughly tripled this year.
Again, the outlook was good, but not great. According to data compiled by LSEG, the company’s fourth-quarter revenue forecast was $37.5 billion, compared with the average analyst estimate of $37.09 billion, plus or minus 2%. Growth rates are still noteworthy, but have clearly slowed down compared to previous quarters. The fourth quarter forecast indicates year-over-year growth of approximately 70%, which is significantly down from the year-ago quarter’s annual growth rate of 265%.
Sales for the quarter ended Oct. 27 rose 94% annually, but were a sequential slowdown from the previous three quarters, when sales rose 122%, 262% and 265%, respectively. In addition to these post-earnings reactions, there is growing market chatter about the possibility of a trade war with China. On November 25, President-elect Donald Trump announced on his first day in office that he would impose major tariffs on products from China, Canada, and Mexico.
According to a report from Reuters, President Trump, who will be inaugurated on January 20, separately outlined “an additional 10% tariff that exceeds any additional tariffs” on imports from China. Stacy Rasgon, a Bernstein Research analyst covering Nvidia and the semiconductor industry, told clients in a note:
“The direct impact of these new tariffs on semiconductors would be very small, even if these new tariffs were to materialize, as imports of ‘raw semiconductors’ into the United States from these affected countries are small. But he also said that “escalation remains a big potential concern.” “Overall semiconductor imports (from all countries) are large enough that the new administration could be affected by broader measures if it so desires.”
When asked about potential tariffs and how they would affect NVIDIA, CEO Jensen Huang said the company would fully comply with any regulations. The exact impact of the tariffs on Nvidia is unclear, but the new tariffs will certainly raise trade barriers and likely cause problems for Nvidia’s supply chain.
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