What Happened?
Shares of leading designer of graphics chips Nvidia (NASDAQ: NVDA) fell 0.4% in the afternoon session after its second-quarter earnings report, which, despite beating profit estimates, failed to deliver the blowout results investors have come to expect.
The chip designer's revenue of $46.74 billion grew an impressive 55.6% year-over-year but was only in line with Wall Street's expectations. Similarly, the company's revenue guidance for the next quarter of around $54 billion merely met consensus forecasts. While adjusted earnings per share of $1.05 beat estimates by 4%, other metrics pointed to slowing momentum. This was the third consecutive quarter of decelerating revenue growth, and inventory levels increased, with Days Inventory Outstanding rising to 106 from 59 in the prior quarter. For a stock priced for perfection, a report that was simply good, not great, was enough to disappoint the market.
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What Is The Market Telling Us
Nvidia’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 3.5% on the news that investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week. The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF.
Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Nvidia is up 30.3% since the beginning of the year, and at $180.28 per share, it is trading close to its 52-week high of $183.16 from August 2025. Investors who bought $1,000 worth of Nvidia’s shares 5 years ago would now be looking at an investment worth $13,711.
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