AI chip giant Nvidia's shares sink despite record sales of $30bn

Nvidia's stocks have dropped even though the AI chip company surpassed expectations by doubling its sales.

Nvidia reported their highest ever earnings of $30 billion in just three months.

The company has benefitted greatly from the rise of artificial intelligence, leading to a significant increase in its stock market worth, surpassing $3 trillion.

However, experts have become accustomed to Nvidia achieving "amazing" increases in sales. The most recent data shows that "the speed of that increase was beginning to decrease," according to Simon French, who leads the research team at Panmure Liberum.

Experts had predicted that sales would increase to $28.7 billion for the quarter ending on July 28th.

Nvidia outperformed this achievement with a 122% growth in revenues from the previous year.

However, Nvidia's stock value decreased by 6% during post-market trading in New York.

Matt Britzman, a senior analyst at Hargreaves Lansdown, mentioned that it is not just about meeting expectations anymore. The markets are anticipating companies to exceed expectations by a significant margin, and today's earnings report seems to have fallen slightly short of that.

In the recent announcements, Nvidia CEO Jensen Huang declared that "Generative AI will transform all sectors."

However, Mr French explained to the BBC that if you set such high expectations, you must continue to experience significant growth.

He mentioned that although their current AI chip, Hopper, is doing well in sales, there have been some delays in producing their next generation chip, Blackwell. This could be one of the reasons why the stock sold off after hours on Wall Street.

Nvidia's quarterly earnings reports have become a highly anticipated event, causing investors on Wall Street to react quickly by either buying or selling shares.

A gathering to watch together was scheduled in Manhattan, as reported by the Wall Street Journal. Mr. Huang, known for wearing his distinct leather jacket, has been likened to the "Taylor Swift of the tech industry".

Alvin Nguyen, a senior expert at Forrester, shared with the BBC that Nvidia and Mr Huang are now synonymous with artificial intelligence.

This has been beneficial for the company up to now, but it could also harm its worth if AI does not live up to expectations after businesses have put in billions of dollars into this technology, according to Mr. Nguyen.

There are countless ways AI can be used, but having just a thousand examples is not sufficient. You should strive for a million potential applications.

Mr. Nguyen also mentioned that Nvidia has a competitive edge as the first company to enter the market, offering top-of-the-line products that customers have been using for years. He also highlighted the presence of a strong software ecosystem.

He mentioned that competitors, like Intel, could slowly reduce Nvidia's market share if they created a superior product, but he noted that this would be a gradual process.