Stock drops despite Nvidia’s record Q3 earnings surge

Nvidia has reported remarkable third-quarter results, with revenue nearly doubling due to the ongoing demand for its artificial intelligence (AI) chips. However, its shares dropped by up to 3% in after-hours trading, reflecting cautious investor sentiment despite an optimistic forecast. The report highlights Nvidia's dominance in the AI sector and the opportunities for share market investment in tech-driven industries.

Revenue surges as AI demand remains strong

For the quarter ending 27 October, Nvidia achieved revenue of ₹35.08 billion, a 94% increase from ₹18.12 billion in the same period last year. Net income more than doubled to ₹19.31 billion from ₹9.24 billion in 2022. Adjusted earnings per share stood at ₹0.81, exceeding market expectations of ₹0.75, according to FactSet.

The company's fourth-quarter revenue outlook of ₹37.5 billion slightly surpassed analysts’ predictions of ₹37.09 billion, showcasing continued growth. Industry analysts attribute Nvidia's performance to its pivotal role in the AI boom, making it an attractive option for share market investment.

AI chips drive record earnings, but supply challenges persist

Nvidia's data centre revenue jumped by 112% year-over-year to ₹30.8 billion, driven by the Hopper computing platform. This platform supports technologies like large language models, generative AI, and recommendation engines. However, Nvidia faces supply constraints for its next-generation Blackwell AI chips, which are crucial for advancing AI applications.

Nvidia’s Chief Financial Officer, Colette Kress, stated that Blackwell chip production is scheduled to begin in Q4 of fiscal 2025 and ramp up in fiscal 2026. Demand is projected to outstrip supply for several quarters, emphasising the product's importance in maintaining Nvidia's market leadership.

Analysts optimistic despite stock volatility

Nvidia’s stock, which has risen 195% this year, reflects strong investor confidence in its AI leadership. Analysts suggest the company’s cautious guidance may signal a conservative approach to growth projections. They also highlighted Nvidia’s plans to exceed earlier estimates for Blackwell chip deliveries, indicating sustained demand.

Key takeaways

1. Nvidia reported a 94% revenue increase in Q3, reaching ₹35.08 billion.
2. AI chips like Blackwell drive growth but face supply limitations.
3. Fourth-quarter revenue is forecast at ₹37.5 billion, slightly exceeding estimates.
4. Nvidia remains a significant player in AI, attracting share market investment.
5. Despite strong earnings, cautious investor sentiment caused a 3% after-hours stock dip.

Nvidia’s exceptional performance underscores the transformative potential of AI and its impact on share market investment opportunities.