AI chipmaker Nvidia, a dominant force in the U.S. stock market rally since 2023, announced its third-quarter revenue forecast above Wall Street estimates, projecting approximately $54 billion, plus or minus 2%. This figure surpassed analysts' average estimate of $53.14 billion, according to LSEG data. However, despite beating expectations, shares of the world's most valuable firm dipped between 2.4% and 3.2% in extended and after-hours trading, paring initial losses. This reaction signals a market that has grown accustomed to “blowout” results, leading to a calibration of expectations rather than outright disappointment.

The robust demand for Nvidia's artificial intelligence chips, driven by cloud providers expanding their infrastructure to power generative AI technology, continues to fuel the company's growth. CEO Jensen Huang dismissed concerns about the end of the AI spending boom, confidently projecting a multi-trillion-dollar market over the next five years. Huang stated that a “new industrial revolution has started,” envisioning $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade. This bullish outlook is supported by significant capital expenditure announcements from hyperscalers like Microsoft and Amazon, who are expected to spend $600 billion on data center capital this year alone. Nvidia's high-end Blackwell and earlier Hopper chips are reported to be largely spoken for, underscoring the intense demand.

Analysts largely affirmed the resilience and long-term potential of the AI trade. Thomas Martin, Senior Portfolio Manager at Globalt Investments, noted that “the overall AI trade is still very much intact,” emphasizing its early stages. Matt Orton, Head of Advisory Solutions at Raymond James Investment Management, highlighted the “durability to this (AI) trade,” seeing no signs of a slowdown reflected in Nvidia's results and suggesting the market is not in an “AI bubble.” Dimitri Zabelin, Senior Analyst at PitchBook, also pointed to expanding U.S. hyperscaler demand and Nvidia's strategic diversification by engaging sovereign buyers. The company's gross margin guidance of 73.5% further demonstrated resilience in profitability.

The somewhat muted stock reaction, despite strong financials, was interpreted by some as a reflection of a slowing *rate* of growth, transitioning from last year's 100% revenue growth to a projected 50-55%. Brian Mulberry, Senior Portfolio Manager at Zacks Investment Management, likened it to Tesla's past where strong financials were met with slowing guidance. However, many analysts viewed the pullback as a buying opportunity. David Wagner, Head of Equity at Aptus Capital Advisors, described the negative reaction as a “knee-jerk reaction,” noting the remarkable 50% growth rate on a $50 billion quarterly revenue run rate. Chuck Carlson, CEO of Horizon Investment Services, observed that the results “were okay. They weren't blow-the-doors-off, but nor were they bad,” with the stock movement depending on the earnings call, particularly regarding China.

A key factor influencing the market's perception and Nvidia's forecast is the ongoing geopolitical situation, particularly concerning its business in China. While Nvidia's Chief Financial Officer Colette Kress confirmed that the current outlook does not assume any shipments of its H20 chips to China, the company had earlier received some licenses to sell them. Nvidia stated that if geopolitical issues subside and more orders materialize, it could add $2 billion to $5 billion in H20 revenue in the third quarter. Michael Ashley Schulman, Chief Investment Officer at Running Point Capital, aptly summarized the challenge, stating, “Nvidia’s biggest bottleneck isn’t silicon, it’s diplomacy.” The estimated $8 billion China impact (opportunity costs) was reportedly in line with Wall Street expectations.

For the fiscal second quarter, Nvidia reported revenue of $46.74 billion, exceeding estimates of $46.06 billion. About half of its $41 billion in data center revenue came from large cloud service providers, though this was slightly below Visible Alpha's estimates of $41.42 billion, a point some analysts suggested indicated caution from cloud providers. The company also authorized an additional $60 billion in share repurchases, underscoring confidence in its financial strength. Kress also indicated that Nvidia's “sovereign AI” efforts are on track to generate $20 billion in revenue this year. The sentiment among market observers, like Larry Tentarelli of Blue Chip Daily Trend Report, is that Nvidia remains “the benchmark Artificial Intelligence stock and the most direct way to invest in the theme,” suggesting that any near-term weakness should be seen as a buying opportunity.