Nvidia’s Upbeat Sales Outlook Gets Bearish Investor Response

Dan Ives, Global Head of Tech Research at Wedbush Securities, reacts to Nvidia earnings.

Nvidia Corp.’s latest sales forecast drew a bearish response from investors, signaling that concerns over a potential bubble continue to weigh on the dominant maker of artificial intelligence processors.

The shares fell as much as 3.4% after trading got underway in New York on Thursday. That came after the chipmaker gave a first-quarter outlook that easily beat the average analyst estimate and Nvidia delivered a 73% surge in fourth-quarter revenue.

While explosive sales growth has turned Santa Clara, California-based Nvidia into the world’s most valuable company — sending shares up about 44% in the last 12 months — investors are seeking stronger assurances that the booming spending can be maintained.

Shareholders still have questions “over whether the current AI spending wave can sustain growth beyond the next few years, and whether Nvidia will remain as dominant as AI shifts from training models to running everyday tasks,” analysts at Hargreaves Lansdown said in a note after the results.

Chief Executive Officer Jensen Huang pushed back on the concerns during Wednesday’s call, arguing that customers are already making money from their newly acquired computing power. That’s why clients will keep investing at elevated levels, he said.

“You need compute capacity, and that translates directly to growth, and that translates directly to revenues,” Huang said. “I’m confident their cash flows are growing.”  Nvidia Corp., the dominant maker of artificial intelligence chips, suffered its worst stock decline in three months after the company’s latest forecast failed to dispel fears of an AI bubble.

The shares fell as much as 5.6% to $184.58 in New York, marking the biggest intraday drop since Nov. 25. The decline followed a first-quarter sales outlook that — on its face — looked impressive. Nvidia easily beat the average analyst estimate and delivered a 73% surge in fourth-quarter revenue.

The reaction was a stark reminder of the skepticism now surrounding Nvidia. After explosive sales growth turned the chipmaker into the world’s most valuable company, investors are seeking stronger assurances that booming AI spending can be maintained.

Shareholders have lingering questions over “whether the current AI spending wave can sustain growth beyond the next few years, and whether Nvidia will remain as dominant as AI shifts from training models to running everyday tasks,” analysts at Hargreaves Lansdown said in a note after the results.  Chief Executive Officer Jensen Huang pushed back on the concerns during a conference call Wednesday, arguing that customers are already making money from their newly acquired computing power. That’s why clients will keep investing at elevated levels, he said.

“You need compute capacity, and that translates directly to growth, and that translates directly to revenues,” Huang said. “I’m confident their cash flows are growing.” Investor Michael Burry, made famous by The Big Short, added to the worries on Thursday. He noted that Nvidia has purchase obligations of $95.2 billion, compared with $16.1 billion a year earlier. That could be risky if demand wavers.

Chief Financial Officer Colette Kress tried to defuse other concerns raised by analysts, including the specter of supply constraints. The company has secured enough components to be able to meet growing demand, she said.

It remains a challenge to produce enough of Nvidia’s most advanced chips, she told analysts. But the company’s current Blackwell lineup — and an upcoming successor, called Rubin — will still beat earlier sales projections, Kress said. Nvidia had previously said that the chips would generate $500 billion by the end of 2026.

“We believe we have inventory and supply commitments in place to address future demand, including shipments extending into calendar 2027,” she said.

Nvidia still faces uncertainty in China, the largest market for chips.

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