Why did NVDA stock drop after Nvidia earnings beat estimates? Here's why investors are worrying about long-term AI dominance outlook

Nvidia NVDA stock today: Even after forecasting first-quarter revenue well above the average analyst estimate and reporting a 73% jump in fourth-quarter sales, Nvidia’s stock dropped on Thursday. The muted response suggests that, despite blockbuster growth, investors are still uneasy about how long the artificial intelligence boom can last.

Why Nvidia Stock (NVDA) Fell Despite Strong Earnings

The chipmaker has become the world’s most valuable firm on the back of explosive AI demand. Its stock has climbed roughly 49% over the past year, fueled by surging spending on the powerful processors needed to train and run AI systems. But shareholders now appear to be asking a tougher question: can this pace continue?

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Is the AI Boom Slowing? Investor Concerns Over Long-Term Growth

In a note following the results, analysts at Hargreaves Lansdown said investors remain concerned “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,” as quoted by Bloomberg.

Nvidia CEO Jensen Huang Defends AI Spending and Future Demand

Chief Executive Officer Jensen Huang pushed back against those concerns during the company’s earnings call. He argued that customers are already generating returns from the computing power they’ve purchased, which should support continued investment.

Huang said, “You need compute capacity, and that translates directly to growth, and that translates directly to revenues,” adding, “I’m confident their cash flows are growing,” as quoted by Bloomberg.
Chief Financial Officer Colette Kress addressed another major concern: supply. While acknowledging that it remains challenging to produce enough of Nvidia’s most advanced chips, she said the company has secured sufficient components to meet rising demand.Also read: Over 25 million hit in what’s being called the largest data breach in U.S. history

Blackwell and Rubin Chips: Nvidia’s Next $500 Billion Opportunity

Nvidia’s current Blackwell lineup, along with its upcoming successor, Rubin, is expected to outperform earlier sales projections. The company previously said those chips would generate $500 billion by the end of 2026. Kress added that inventory and supply commitments extend into calendar 2027.

China Export Restrictions and 25% Tariff Impact on NVDA Stock

Still, uncertainty remains in China, the largest market for chips. The US government has granted licenses allowing Nvidia to ship a limited number of H200 processors there, but the company does not yet know whether Chinese authorities will approve the shipments. For now, Nvidia continues to exclude China data center revenue from its forecasts. The chips must also undergo US inspection before shipping and face a 25% tariff when entering the US.

Nvidia Q1 Revenue Forecast Tops Expectations but Fails to Excite Investors

For the current quarter, Nvidia expects revenue of about $78 billion. While that tops the average analyst estimate of $72.8 billion, some projections had been closer to $80 billion. In the fiscal fourth quarter ended Jan. 25, revenue rose 73% to $68.1 billion, beating expectations of $65.9 billion. Profit came in at $1.62 per share, excluding certain items, above the predicted $1.53. Adjusted gross margin reached 75.2%, also edging past estimates.

Data Center Revenue Powers Nvidia’s AI Dominance

Data center revenue, the engine behind Nvidia’s AI dominance, totaled $62.3 billion for the quarter, exceeding analyst expectations of $60.4 billion. Other segments were less impressive. Gaming revenue came in at $3.73 billion, below estimates of $4.01 billion, while automotive sales reached $604 million, missing projections of $643 million.

Memory Chip Shortage Creates Pressure on Nvidia’s Gaming Business

A broader industry issue is also weighing on parts of the business: a shortage of memory chips. These components are essential for everything from smartphones to supercomputers. The constraints have driven up prices and limited shipments, particularly affecting Nvidia’s gaming division. Kress said it’s unclear whether the situation will ease enough this year to support growth in that segment.

Meta’s Multi-Billion-Dollar AI Deal Boosts Nvidia and AMD

Meanwhile, Nvidia continues to deepen relationships with major cloud and AI players. Earlier this month, Meta Platforms Inc. agreed to deploy “millions” of Nvidia processors over the coming years. Nvidia’s main rival, Advanced Micro Devices Inc., announced a similar long-term deal with Meta, saying it would be worth multiple tens of billions of dollars, as per the Bloomberg report.

FAQs

Why did Nvidia stock fall even after strong earnings?
Investors are worried about how long the AI boom can last, even though the numbers look great today.

How much did Nvidia’s revenue grow?
Fourth-quarter revenue jumped 73% year over year.