Nvidia's Forecasts Disappoint, Leading to Decline in Chip Stocks
Brief news summary
Nvidia's underwhelming forecasts have caused a premarket drop of 4.5% in its shares, resulting in a potential $150 billion loss in market value. This decline has had a ripple effect on chip companies and Asian tech stocks. Although Nvidia surpassed revenue and earnings estimates for the second quarter, its cautious outlook has overshadowed its success. This response may affect market sentiment, especially during this volatile time. Investors are also closely monitoring the U.S. employment report for any signs of improvement. Previously, Nvidia's success was driven by optimism in AI technology, but disappointing earnings from tech companies have shaken confidence in the rally. While Nvidia projects an 80% revenue growth for its fiscal third quarter, their adjusted gross margin forecast fell below market expectations. Despite the recent decline, Nvidia's stock is still up around 150% for the year, making it the top performer in Wall Street's AI rally.Nvidia disappoints investors with forecasts, causing chip stocks to decline. Nvidia's premarket trading dropped 4. 5%, potentially resulting in a $150 billion loss in stock market value. Other chip firms like Broadcom, Advanced Micro Devices, Arm, and Micron also saw a decrease of 1. 6% to 2% in their shares. TSMC, Nvidia's chip manufacturing partner, experienced a 2% decrease in U. S. -listed shares. The decline in Nvidia fell short of the 11% price swing that options market data had anticipated. Despite previously exceeding consensus analyst estimates, Nvidia's soft forecasts overshadowed a beat on second-quarter revenue and adjusted earnings, as well as a $50 billion share buyback.
As a result, market sentiment may be impacted, especially during September, a historically volatile period. Investors are also monitoring the upcoming U. S. employment report and expressing concerns about the increases in spending by major players like Microsoft and Alphabet in the race to dominate AI technology. Nvidia forecasts third-quarter revenue of $32. 5 billion, with estimated growth of 80% from the previous year. The company also expects an adjusted gross margin of 75%. Nvidia's stock, which has had significant growth this year, was valued at a lower price-to-earnings ratio compared to previous years.
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