Nvidia (NVDA-US) delivered blockbuster earnings last week, but its stock staged a dramatic reversal that left investors rattled. Shares surged more than 5% in the morning, seemingly ready to break the $200 mark, before collapsing in the afternoon to close down over 3%. The single-day swing wiped out nearly $392 billion in market value, equivalent to the size of an entire ASML or Costco.
Strong Earnings, Weak Confidence
On paper, Nvidia’s results were stellar:
- EPS: $1.30, beating estimates of $1.26.
- Revenue: $57 billion, up 62% year-over-year, topping forecasts of $54.9 billion.
- Guidance: $65 billion for the current quarter, above consensus $62.2 billion.
Even more striking, Nvidia said its forecast excludes any revenue from China, underscoring strength in other regions despite ongoing U.S.-China tech tensions.
So why did the stock "die on the news"? Analysts point to concerns about sustainability. Investors are asking whether hyperscalers like Microsoft, Google, and Meta can maintain their AI capital expenditure boom. Once GPU demand plateaus, where will growth come from?
Big Sellers and Bearish Voices
The sell-off wasn’t entirely unexpected. SoftBank and Peter Thiel’s fund had already trimmed Nvidia stakes before earnings, signaling caution. Meanwhile, Michael Burry, famed for predicting the 2008 crisis, raised alarms about accounting practices. He argued that companies may be overstating GPU lifespans, lowering depreciation costs and inflating profits.
Nvidia CFO Colette Kress pushed back, noting that "Blackwell chip sales are strong, and customers’ six-year-old chips are still operating at full capacity." The message: Nvidia’s products are durable, and extending depreciation periods is reasonable.
Sector Shockwaves
Nvidia’s plunge rippled across the semiconductor sector:
- AMD (AMD-US): down 7.84%.
- Broadcom (AVGO-US): down 2.14%.
- Philadelphia Semiconductor Index: down nearly 5%.
- Nasdaq Composite: off 2.2%.
Yet amid the gloom, a positive development emerged. The U.S. Department of Commerce approved exports of advanced AI chips to the Middle East, including up to 70,000 units for UAE’s G42 and Saudi Arabia’s Humain. Valued at $2 billion, the deal signals Nvidia’s expansion into oil-rich markets with deep capital and cheap energy.
Wall Street Still Bullish
Despite volatility, analysts remain constructive. FactSet data shows an average target price of $248, implying 37% upside from Thursday’s close at $180.64. Firms like Melius Research and D.A. Davidson maintain "buy" ratings, arguing that hyperscalers haven’t finished buying—and Middle Eastern demand could provide fresh momentum.
The Bottom Line
Nvidia’s earnings highlight the depth of the AI investment cycle, but the days of automatic rallies on good results may be over. Investors will now scrutinize every Capex trend and depreciation figure.
For long-term holders, fundamentals remain strong. The volatility may be more about sentiment than structural weakness. Watch for Blackwell shipments and Middle East orders—they could be Nvidia’s next growth catalysts.