Salesforce Stock Falls On Weak Generative AI View After Nvidia Earnings

Salesforce and Nvidia’s latest numbers left investors with questions about the future of generative AI. On Wednesday, Salesforce reported annual results and guidance below estimates, noted Reuters, while Nvidia’s Q4 2024 earnings and outlook beat expectations, according to the Wall Street Journal.

The companies’ share prices did not respond quite the way I thought they would. While Salesforce’s stock trades down 3% — which makes sense to me; I thought Nvidia’s clear beat and raise would send shares soaring — instead they were down 1.5% before rising 2% in after-hours trading.

What message is the market sending? Could the lagging adoption of Salesforce’s Agentforce — aimed at helping companies build AI agents to, say, plan a vacation, then search for and book the best flights, hotels, and restaurants, as I described in my book, “Brain Rush” — bode ill for the future of generative AI?

Nvidia’s future may depend on whether the benefits of generative AI for enterprises and individuals exceed the costs and risks of building and operating the technology. In my view, a killer app — akin to the iTunes store that drove a six-fold boost in iPod sales in 2003 — must emerge before a payoff for generative AI becomes clear, notes “Brain Rush.”

Salesforce is bullish on Agentforce. “A lot of other vendors are talking about their agent capabilities, but few are able to show that they’ve got this really running at scale,” Salesforce co-founder and CEO Marc Benioff said on a February 26 conference call with analysts.

Despite the 17% drop in Nvidia’s stock price the day after my Forbes post on the topic, the AI chip designer is thrilled by DeepSeek’s success. “DeepSeek was fantastic,” Nvidia CEO Jensen Huang told CNBC. “It was fantastic because it open sourced a reasoning model that’s absolutely world class. The amount of computation necessary to do that reasoning process is 100 times more than what we used to do,” he added.

While they set higher 12-month price targets, analysts have mixed views on where their shares are heading. Strong Blackwell demand may not satisfy analysts who see Nvidia’s valuation as high in light of the company’s declining margins and slowing growth. Analysts see Salesforce as struggling to monetize Agentforce fast enough to boost growth.

I have contacted Salesforce to request comment and will update this post if I receive a reply.

The Diverging Performance And Prospects Of Salesforce And Nvidia

Salesforce fell short of expectations for performance and prospects while Nvidia beat and raised February 26.

Salesforce Misses Targets

Salesforce’s performance for the quarter ending January 31 was mixed. Revenue rose 7.6% to $9.99 billion — $50 million short of the London Stock Exchange Group consensus while the company’s adjusted earnings per share of $2.78 beat expectations by 17 cents a share, noted CNBC.

Salesforce’s estimate for the April-ending quarter was below the LSEG consensus. The company forecast $9.73 billion in revenue — $180 million below estimates while its adjusted EPS forecast of $2.54 fell seven cents short of the LSEG consensus.

Agentforce has yet to generate significant revenue. Salesforce said it has completed “more than 3,000 paid deals involving Agentforce since October,” reported CNBC. The service will “make a modest contribution to revenue in fiscal 2026, with a larger effect in the following year,” Salesforce’s departing CFO Amy Weaver told investors, CNBC noted.

Customers are skeptical of AI agents in general. Agentforce coordinates a series of AI chatbots during a process like booking travel. To create value for users, the service must solve a company’s specific business problem quickly with no errors at a lower cost. Some companies are working out the kinks to realize that vision, according to my February 14 Forbes post.

One analyst echoed this observation. “Given how poor initial generative AI experiments were for many companies, they’re not just writing blank checks until Salesforce shows them Agentforce actually works,” Valoir CEO Rebecca Wettemann told Reuters. “The next quarter or two will be critical for Salesforce,” she added.

Nvidia Beats And Raises — With Some Flaws

By contrast, Nvidia’s earnings and outlook exceeded expectations while the company’s latest Blackwell chips were in high demand. Nevertheless, analysts saw flaws in the form of declining margins, slowing growth, and uncertainty regarding the impact of tariffs on China.

Nvidia told investors its January-quarter ending revenue and net income exceeded expectations. Sales rose 78% to $39.3 billion in the quarter while net income soared 80% to $22 billion — beating the FactSet consensus, according to the Wall Street Journal.

Strong Blackwell sales — which hit $11 billion — and a higher-than-expected revenue forecast for the April-ending quarter also bolstered the bull case. Nvidia’s projection of $43 billion in sales for the current quarter — a 65% increase — was about $1 billion more than analysts projected, the Journal noted.

Nvidia growth is amazing compared to most companies — yet the slowdown from 78% in the last quarter to 64% in the current one is a far cry from the faster than 200% growth the company enjoyed for several quarters last year, as I noted in my Tuesday Forbes post.

Moreover, the company’s profit margins narrowed due to the higher cost of making its newest data-center equipment. In addition, Nvidia’s operating expenses grew 48% due to “bigger pay packages for an expanding workforce,” CFO Colette Kress told investors, according to the Journal.

Export restrictions and competitive pressure from Huawei have reduced Nvidia’s revenue in China, Huang told CNBC. He expects developers to use software to find ways around the export restrictions.

Meanwhile the White House could ban more Nvidia chip sales to China and put tariffs on the company’s chips made in Taiwan. “It’s an unknown until we understand further what the U.S. government’s plan is, both its timing, its where and how much,” Cress told investors, according to the New York Times. “We are awaiting.”

Where Will Salesforce And Nvidia Stock Go Next?

Analysts see considerable upside in shares of Salesforce and Nvidia. Salesforce stock could climb 25.2% to reach the average price target of $384.78 from 41 Wall Street analysts while Nvidia stock may pop 36% to reach $178.56 — the average price target of 37 Wall Street analysts, noted TipRanks.

Yet those numbers mask some analyst discontent.

One investor expressed concern about Salesforce. “Salesforce seems to be struggling a bit,” SWBC chief investment officer Chris Brigati told Bloomberg. The reports from Nvidia and Salesforce “suggest the AI trade won’t be anywhere near as robust as it was in 2023 or 2024, though it remains positive, with some room to grow. It’s like we’re dropping from fifth gear to fourth,” he added.

Another analyst echoed this sentiment. “With Nvidia lacking the spark that it usually brings, probably U.S. stocks will continue to lack a near-term driver and the rotation trade to China/Europe could find more runway,” Saxo Markets chief investment strategist Charu Chanana told Bloomberg.

The results are “still not enough to address and calm” the concerns around geopolitics, tariffs and the shifting landscape in AI trade, she added.

Another skeptical analyst asked whether Nvidia has topped out. Is this “as good as it gets for Nvidia?” wrote D.A. Davidson analyst Gil Luria in a note featured by MarketWatch.

“Despite demand in the near term continuing to be strong, we still believe a decline in demand for Nvidia compute is inevitable as customers begin to scrutinize their [return on investment] on AI compute,” Luria wrote.

Many analysts felt upbeat about Nvidia. “The supply chain should continue to improve and we see no signs of demand issues,” Jefferies analyst Blayne Curtis noted in a report. While the company suffered a “downtick in gross margins,” completing Nvidia’s transition to Blackwell will resolve the problem, Curtis added.

Unless the AI trade shifts back to fifth gear, investors may enjoy better gains elsewhere.