Chip designer Nvidia released its latest results yesterday, marking the eighth consecutive quarter of under-promising and over-delivering in both earnings and revenue.
Earnings came in 8% ahead of expectations – better than the 6.25% beat achieved in the previous quarter, but below the double-digit upside surprises between May 2023 and February 2024.
A “decent” beat according to Dan Coatsworth, investment analyst at AJ Bell, and yet share prices fell 2.5% in pre-market trading, as investors expressed disappointment at margin decline and forward revenue guidance.
“The negative market reaction to Nvidia’s results suggests investors are now focusing on the minutiae rather than the big picture,” said Coatsworth.
“At face value, Nvidia has once again generated the kind of growth that most companies will never achieve in their lifespan. What’s troubled investors this time was a quarter-on-quarter decline in gross margins, with guidance for them to fall further in the coming quarter, and weaker than expected forward guidance for revenue.”
This should not be a reason to panic, as margins are still over 70%, which many companies could only dream of, said the analyst, and Nvidia is confident they will rebound as production ramps up for its latest Blackwell chips announced in March.
But to Coatsworth, two headwinds might be on the cards for 2025 – antitrust measures and president-elect Donald Trump’s possible restrictions on tech exports.
“The more successful Nvidia becomes, the greater the potential for an antitrust clampdown. There have been suggestions that Nvidia might be making it hard for customers to switch to other vendors and giving preferential prices to customers who exclusively use its products,” he said.
Trump could also pose problems by taking a more aggressive stance on China accessing US technology.
“Once Trump returns to the White House, he could easily tighten the restrictions on US technology sold into China which could have a negative impact on Nvidia’s earnings. It’s a real risk and something to watch closely once the president-elect has settled back into the Oval Office,” Coatsworth noted.