Once again, investors have been reminded that Nvidia (NASDAQ:NVDA) isn’t slowing down. The leading chipmaker reported third-quarter earnings yesterday and successfully surged past analyst expectations, demonstrating year-over-year (YOY) sales growth of more than 200%. Still, despite the company’s increases in both income and revenue, NVDA stock is struggling somewhat today due its outlook. Specifically, the company believes that sales will fall in the next quarter due to restrictions on exports to China. This is leading to some pressing questions as Nvidia prepares to end a historic year.
After the artificial intelligence (AI) boom made Nvidia a trillion-dollar company, speculation rose as to how high NVDA stock could go. Some have seen shares as significantly overvalued but, through it all, NVDA has mostly trended upward. Now, the possibility of decreasing China sales is casting more uncertainty over the company’s future, even after yet another quarter of growth.
Are we nearing the end of Nvidia’s winning streak? Let’s take a closer look.
What’s Happening With NVDA Stock?
There’s no question that Nvidia has been in a position of power. The market-defining AI boom of 2023 can be traced back to the launch of ChatGPT, which runs on Nvidia’s chips. However, the trends that pushed NVDA stock to new heights may now be shifting. As InvestorPlace’s Luke Lango reports, companies are starting to produce their own chips, which could severely compromise Nvidia’s dominance as an AI leader.
Now, the prospect of losing China sales is threatening to push shares down as well. Indeed, today’s price movement reflects that aspect of the company’s forecast more than its earnings. As of this writing, NVDA stock is down 3%, even after the company reported substantial revenue growth.
This may be casting a dark shadow over the company’s earnings success, but the predictions aren’t all negative. Chief Financial Officer Colette Kress stated in a letter to shareholders that the company believes it can “more than offset” any losses through growth in other areas. Additionally, other forecasts certainly lean in the company’s favor. As The Wall Street Journal reports:
“Fortunately for Nvidia, their demand is going in only one direction these days—skyward. Wall Street sees the growing bulk of that spending flowing straight into Nvidia’s coffers. The company’s data center revenue is now projected to hit $65 billion in the fiscal year ending January of 2025, more than double the projected combined data center sales of rivals Intel and AMD for about the same period.”
WSJ also notes that some of tech’s biggest firms have yet to move away from Nvidia, although they easily could. The outlet cites Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) as an example.
What Comes Next?
As the dust settles from the latest Nvidia earnings smash, there is a key lesson for investors. The prospect of compromised China sales is certainly a concern, as NVDA stock has proven today. But that doesn’t mean shares can’t rebound in 2024 if Nvidia can display growth in other areas. As InvestorPlace contributor Tyrik Torres notes, demand for AI applications isn’t slowing down.
As Torres sees it, this puts Nvidia in an excellent place to keep growing, even as other semiconductor companies work to chip away at Nvidia’s market share. The fourth quarter may end Nvidia’s earnings winning streak, but the firm could still overcome concerns regarding China.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
