Nvidia’s (NVDA) growth numbers are no longer impressing Wall Street like they once did.
Nvidia reported its results on Wednesday, which showed the company’s earnings and revenue rose more than 100% year-over-year. However, this was also the company’s slowest year-over-year revenue growth at 122%, and the year-over-year growth rate was less than half of what Nvidia reported in the first two calendar quarters of 2024.
Early Thursday morning, shares lost as much as 3.5 percent.
And this slowdown in growth, Gil Luria, Managing Director of DA Davidson, told Yahoo Finance, is the biggest concern about the stock right now and the reason he continues to rate the AI company “Neutral.”
“Next year we will see at least slower growth and possibly a decline in sales at some point,” Luria said.
“If you look at the consensus estimates and the sell-side estimates, they assume that growth will continue at very, very high rates, which is very difficult to justify when you consider that Nvidia’s revenue represents the margins of these other companies.”
At some point, Luria argued, the big tech hyperscalers like Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL, GOOG) and Meta (META) would start to curb spending. And since they account for the lion’s share of Nvidia’s current AI chip sales, that would likely be a hindrance to future revenue growth.
“The estimates for next year and the year after are completely out of control,” Luria said.
Nvidia’s earnings call was still quite optimistic, with CEO Jensen Huang describing demand for the AI leader’s new Blackwell chip as “incredible.” And many Wall Street analysts remained bullish on the stock as fears about delays to the Blackwell chip eased somewhat during the earnings call.
But for investors valuing a stock that has risen more than 1,000% since the current bull market began in October 2022, slowing growth appears to be a sticking point. As Jefferies analyst Blayne Curtis wrote in a note to clients, Nvidia’s forecast for current-quarter revenue of $32.5 billion — plus or minus 2% — seemed “good, but not good enough.”
Nvidia’s results also did not surprise Wall Street as quickly as before.
The company posted the smallest positive surprise to Wall Street’s revenue expectations since the beginning of 2023. The roughly 5 percent beat in earnings per share was also the smallest surprise since the start of the AI revolution in 2023.
“Expectations were exceeded this time around by a far greater margin than we have seen before,” wrote Ryan Detrick, chief market strategist at the Carson Group, in response to the earnings release.
“Even forward guidance has been raised, but again not to the same extent as in previous quarters. This is a great company, with revenue still growing at 122%, but it seems like the bar has just been set a bit too high this earnings season.”
Josh Schafer is a reporter at Yahoo Finance. Follow him on X @_joshschafer.
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