Investors currently have high expectations of companies associated with artificial intelligence. Nvidia, whose shares have increased by over 160% since the start of the year, has presented its second-quarter results. Despite exceeding analysts’ forecasts, share prices are falling by almost 7%. Even though the results were quite good, they did not meet investor expectations.
Results published yesterday by Nvidia show that demand for AI solutions remains strong. The company’s revenue increased by 122% year on year, reaching $30.04 billion, and data center revenues rose 154% to $26.3 billion, significantly exceeding previous estimates. Nvidia also announced an additional buyback program of its own shares worth $50 billion and forecasted continued revenue growth in the coming quarters. The company also boasted a cash reserve of $34.8 billion.
The Nvidia report presents a picture of a company fully exploiting the AI revolution. Other major tech players such as Meta, Microsoft, and Alphabet are investing huge sums in the development of artificial intelligence. This money significantly contributes to Nvidia’s portfolio, which has an almost monopolistic position in the market for microprocessors for these applications. In addition, despite previous concerns about possible delays, the company anticipates revenues in billions of dollars from the new Blackwell chip series.
Although Nvidia’s results once again exceeded analysts’ expectations, investors were hoping for even better performance. The share price rise of 161% since the beginning of the year makes expectations of the company almost impossible to meet. As a result, the company’s shares are currently falling by almost 7% in pre-session trading, as the US stock market has not yet started trading.
It’s worth noting that Nvidia is the third most valuable company in the world, although it grows at a pace more typical of small- or medium-capitalization growth companies. This unusual combination of scale and growth requires caution.
Nvidia’s shares are highly priced, especially compared to the broader market. The forward P/E (price-to-earnings) ratio is 47.60, while the average for the S&P 500 Index is 22.48. To make this valuation more attractive, a drop in price or higher earnings forecasts would be necessary.
One thing is certain: artificial intelligence is not a passing fad. Nvidia is already generating significant revenue, as many companies are investing large amounts in AI chips and technologies or modernizing existing systems. It is predicted that global expenditure on artificial intelligence will reach $632 billion by 2028, and Nvidia, as a pioneer in the field of graphics processors, is at the forefront of this trend.
Paweł Majtkowski, eToro analyst in Poland.
Source: https://ceo.com.pl/wyniki-nvidia-dobre-ale-niewystarczajace-by-zadowolic-inwestorow-73627
