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Nvidia's (NVDA) latest earnings failed to match up to investor's lofty expectations for the chipmaker, which has become known as the stock market's AI darling, with a share price drop dragging its market capitalisation under the $3tn mark.
In its fourth quarter earnings, released after the market close on Wednesday, Nvidia (NVDA) delivered revenue of $39.3bn, beating estimates of £38.2bn. Earnings per share of $0.89 were also ahead of forecasts of $0.84. In addition, the company said it expected to generate revenue of $43bn for the first quarter, better than the $42.3bn expected.
However, Nvidia (NVDA) guided to gross profit margins of 70.6% to 71% in the first quarter, which would be down on the 73% it reported in the fourth quarter.
Cody Acree, managing director and senior research analyst at Benchmark Company, told Yahoo Finance that Nvidia's (NVDA) margin outlook of 71% is "a little concerning".
"I think that's indicative of more pricing pressure, more competition from AMD (AMD), and more price sensitivity at their customers as they're investing their own dollars to create their own ASICs [application-specific integrated circuits]," he said.
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Nvidia's (NVDA) shares fell 8.5% on Thursday, as investors digested the results. This latest fall in Nvidia's (NVDA) share price followed a sharp drop in the stock January, after the release of a low-cost artificial intelligence (AI) model by Chinese startup DeepSeek rattled investors as they questioned the level of spending on the technology by major tech firms. The drop in Nvidia (NVDA) shares wiped $589bn off its market value, marking the largest single-day loss in stock market history.
Dan Coatsworth, investment analyst at AJ Bell (AJB.L), pointed out that Nvidia (NVDA) was now one of the worst performing US stocks of 2025 so far.
He said that "better-than-expected results failed to calm market concerns about the appearance of China’s DeepSeek and how its lower cost approach to AI could be the trigger for the hype cycle to progress from euphoria to the start of the downward phase. DeepSeek threatens to be the trigger to make companies look hard at how much it costs to facilitate AI and search for cheaper solutions."
“Amazon (AMZN), Google (GOOGL, GOOG), Meta (META) and Microsoft (MSFT) are now building AI chips of their own, creating another headwind for Nvidia (NVDA) and suggesting that its stellar growth rates of the past few years may not be sustainable," Coatsworth added.