Why Nvidia Stock Is Falling Today

Nvidia (NVDA -3.54%) Shares are down on Thursday after the company released its second-quarter results. Shares of the artificial intelligence (AI) leader were down 3.2% at 10:15 a.m. ET, according to data from S&P Global Market Intelligence.

Nvidia released Q2 results after the market closed yesterday and delivered significantly better results than most Wall Street targets. The company also issued guidance for the third quarter that beat the average analyst estimate. But expectations were high for the report, and comments on the investor conference call suggested that investors may have to wait longer for the semiconductor specialist’s next-generation Blackwell processors.

Nvidia stock falls despite excellent Q2 results

Nvidia posted non-GAAP (adjusted) earnings of $0.68 per share on revenue of $30 billion in the second quarter of its current fiscal year, which ended July 28. Meanwhile, the average analyst estimate had called for the business to post adjusted earnings of $0.64. with revenues of 28.7 billion dollars. The company’s sales rose 122% year-over-year in the period, and adjusted earnings per share rose 152% year-over-year.

It was a fantastic quarter for the business, with AI-related demand spurring another round of big growth from data center customers. Segment revenue grew 154% year-over-year, and strong selling prices for graphics processing units (GPUs) and accelerators in the category helped the business achieve an adjusted gross margin of 75.7%. That was down slightly from the 78.9 percent margin it posted in the fiscal first quarter, but still beat the company’s target margin of 75.5 percent and signaled that Nvidia’s pricing power for hardware- its most advanced remains very strong.

Strong Q3 guidance does not overshadow concerns over Blackwell delays

For the third quarter, Nvidia guided for revenue of $32.5 billion — a target that came in ahead of Wall Street’s average estimate for sales of $31.7 billion in the period. The company also guided for an adjusted gross margin of 75%. While this suggests that gross margin will decline on a sequential quarterly basis, the decline here appears very small and should actually alleviate concerns about pricing power.

But despite strong second-quarter results and Q3 guidance, investors are focusing on some uncertainty surrounding the launch of Nvidia’s Blackwell processors. The company said production of its next-generation chip platform will ramp up in the fourth quarter of this year, suggesting the new processors may miss the originally announced 2024 launch window and move into 2025.

The possibility of Blackwell being delayed due to a design flaw was already widely reported before Nvidia’s earnings report, so the potential for the launch to be pushed into next year isn’t shocking. But expectations were so high on the report that investors appear to be focused on the implication of a relatively short delay amid signs that the business is otherwise firing on all cylinders.