Nvidia Stock Falls as Earnings Show AI Isn't Growing Revenue Like It Hoped

"AI is still there, but I think people got a little too excited, a little too over-hyped in terms of what we can expect in the near term."

Present Imperfect

AI chip maker Nvidia is struggling to meet some sky-high expectations.

Its Wednesday earnings report showed that the company's earnings and revenues are growing — by more than 100 percent — but not as much as investors had hoped, given the immense expectations around the role hardware is playing in the tech sector's AI fever.

As Bloomberg put it, the company's report "needed to be perfect" given its nearly $2 trillion in market value, placing Nvidia squarely in the maelstrom of the ongoing AI hype wave.

Investors weren't happy, with shares plunging more than six percent on Thursday.

So what gives? Simply put, the market was hoping for far more from the chipmaker, as is clear from its shares rallying more than 150 percent this year alone.

Could this be a sign that investors are starting to become wary of the immense hype surrounding AI? Is the purported "AI bubble" set to burst?

Chips Down

Investors are mixed on the topic.

"AI is still there, but I think people got a little too excited, a little too over-hyped in terms of what we can expect in the near term," US Global Investors head trader Michael Matousek told Bloomberg.

Nvidia saw much of its gains this year wiped out in a matter of just seven weeks this summer, losing almost 30 percent of its value, as CNBC reports. At the time, concerns about rampant AI spending kicked off a major selloff, with investors becoming increasingly worried about a bursting AI bubble.

But the company managed to recoup those losses over the past month.

The latest retreat also indicates wariness about upcoming chip availability. Nvidia recently showed off its next-generation Blackwell computing platform designed to build and run generative AI models, but investors have voiced concerns that the company may not be able to keep up with demand.

"Demand for Blackwell platforms is well above supply, and we expect this to continue into next year," Nvidia CFO Colette Kress admitted during a call with analysts.

Nonethless, CEO Jensen Huang is adamant that the AI hype cycle is far from over, and that the AI models of the future will only need more computing power.

"The frontier models are growing in quite substantial scale," he told analysts.

But whether all of this spending on AI will eventually result in enough of a return to satisfy investors remains unclear.

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