By Max A. Cherney, Arsheeya Bajwa and Stephen Nellis
SAN FRANCISCO (Reuters) – Nvidia forecast its slowest revenue growth in seven quarters on Wednesday, with the artificial intelligence chipmaker failing to meet the high expectations of some investors who have made it the world’s most valuable company.
Shares of the Santa Clara, California-based company fell 5% after reporting results, but quickly pared the losses and fell 2.5% after hours. They closed 0.8% lower during the regular session.
Expectations were high ahead of the results: Nvidia shares rose more than 20% in the past two months, hitting an intraday record on Monday. The stock is up nearly fourfold this year and is up more than ninefold in the past two years, giving it a market value of $3.6 trillion.
Nvidia is in the process of launching its powerful Blackwell family of AI chips, which will initially weigh on the company’s gross margins but will improve over time.
The new line of processors has been embraced by Nvidia’s customers and the company will exceed its initial expectations of several billion dollars in revenue from the processors in the fourth quarter, Chief Financial Officer Colette Kress told analysts on a conference call on Wednesday.
Asked about media reports that a flagship liquid-cooled server with 72 of the new chips experienced overheating issues during initial testing, CEO Jensen Huang said there are no issues and that customers such as Microsoft, Oracle and CoreWeave are deploying the systems.
“There are no issues with our Grace Blackwell liquid-cooled systems,” Huang told Reuters. “The engineering is not easy at all because what we do is difficult, but we are in good shape.”
Initially, the Blackwell chip family will have gross margins in the low 70% range, but will increase to the mid-70% range as production increases, Kress said.
The company expects fourth-quarter revenue of $37.5 billion, plus or minus 2%, compared with the average analyst estimate of $37.09 billion, according to data compiled by LSEG.
While the growth rate is still staggering thanks to huge demand for the company’s chips that power complex generative AI systems, it marks a marked slowdown from previous quarters, when Nvidia mostly posted revenue that at least doubled.
Nvidia’s fourth-quarter forecast indicated that the company’s revenue growth will slow from 94% in the third quarter to about 69.5%.
“Investors have become accustomed to this company’s huge hits, but that’s becoming increasingly difficult,” said Ryan Detrick, chief market strategist at Carson Group. “This was still a very solid report, but the truth is that when the bar is set so high, things only get harder.”