Nvidia share price cracks 4% after AI chip giant beats Wall Street estimates in Q4: Should you buy the dip? | Stock Market News
Nvidia‘s share price cracked four per cent on Thursday, February 27, after the Silicon Valley’s artificial intelligence (AI) chip manufacturing giant beat Wall Street estimates in its fourth-quarter earnings, signalling the AI boom is far from over. However, it failed to bring buyers back into the elite “Magnificent Seven” megacap group of stocks that have dipped in the last three months.
Nvidia’s stock initially rose after markets opened in New York on Thursday but fell as much as 4.6 per cent. The stock had been down 2.2 per cent year-to-date (YTD), following stratospheric gains in 2023 and 2024 that turned Nvidia into the world’s most valuable chipmaker. Nvidia shares have dipped this year due to concerns that data centre operators will slow spending.
Nvidia Q4 Results
Nvidia CEO Jensen Huang said that demand for its latest Blackwell chip was “amazing” and that the company had already earned around $11 billion in revenue related to the processor in the fourth quarter. The world’s second-most valuable company has been the top beneficiary of the AI-fueled spree over the past two years, with its shares gaining more than 400 per cent.
Nvidia has doubled its revenue over the past two years by tapping into the AI-driven rally. Nvidia got $11 billion of revenue from Blackwell AI in the fourth quarter, something Nvidia described as the “fastest product ramp” in its history. “Demand for Blackwell is amazing,” said CEO Jensen Huang.
Though Nvidia’s fiscal fourth-quarter sales topped analysts’ estimates, they did so by the smallest margin since February 2023. According to Bloomberg, earnings, meanwhile, had the narrowest upside since November 2022.
Revenue in Q4 rose to $39.3 billion, a 78 per cent yearly increase from $22.1 billion in the same quarter last year. Net income was $22.1 billion (80 per cent yearly growth), surpassing expectations of $19.8 billion, suggesting investors might rethink returning to the US market from China’s.
The data center unit, by far Nvidia’s biggest source of revenue, generated sales of $35.6 billion, beating the average estimate of $34.1 billion. Gaming-related sales—once Nvidia’s core business—amounted to $2.5 billion. Analysts projected an average of $3.02 billion. Automotive sales were $570 million.
According to reports, the data centre division generates more revenue than rivals Intel Corp. and Advanced Micro Devices Inc. Nvidia expects total revenue of $43 billion, plus or minus two per cent, for the first quarter, compared with analysts’ average estimate of $41.78 billion.
Nvidia also expects its margin to dip in the current quarter to 71 per cent from 73.5 per cent with the ramp-up of Blackwell AI chip production, though finance chief Colette Kress said the company would return to the mid-70 per cent gross margin range later in the fiscal year. It indicated demand remains strong, though its margin outlook ebbed from previous quarters.
Last month, DeepSeek added to the worries after releasing a powerful AI model requiring far fewer resources to create. The announcement in late January led to a widespread selloff in AI-related shares. Nvidia shed a staggering $589 billion of capital in one day of trading, a market record.
Nvidia shares after Q4 Results: Should you buy or sell?
After DeepSeek, Nvidia was keen on stamping its superiority, saying its chips are more advanced and have better use cases in the AI ecosystem. Since the results, 57 of 63 Wall Street analysts gave Nvidia a ‘Buy’ rating, suggesting an emerging bullish sentiment despite the current weakness of US tech stocks.
According to Subho Moulik, Founder and CEO of Appreciate, Nvidia’s adjusted gross margins will not improve soon. Management expects them to remain in the low 70s due to “a significant ramp of Blackwell production.”
Also Read: Tech giants Nvidia, Tesla emerge top US-listed stock picks by Indians in 2024; ETFs gain momentum
“The world’s leading chipmaker has once again delivered strong results, but with the AI sector evolving rapidly and macroeconomic uncertainties looming, the margin for error is razor-thin,” said Moulik. “Investor sentiment remains cautious, as any perceived weakness—in financials, competition, or macro conditions—could weigh on the stock,” added the market analyst.
According to analysts, customer concentration risk remains in the current scenario, with major clients like Microsoft, Meta, and Alphabet (Google)’s current AI war continuing to dominate Nvidia’s revenue stream.
“Nvidia’s numbers remain robust, shrinking gross margins notwithstanding. From an investment perspective, Nvidia remains a buy-on dip, particularly with its next-gen Blackwell chips posting amazing numbers and protecting Nvidia’s medium-term runway,” said Moulik.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
