The Nvidia logo at Computex in Taipei, Taiwan, June 5, 2024.
Wang An | Reuters
This report comes from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open keeps investors updated on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Volatile stocks
Major U.S. stock indexes fell on Wednesday, weighed down by Nvidia’s earnings report, which made investors nervous. super microcomputer Also a major drag, the company’s stock price plummeted 19% after the company said it would not file its annual report on time and Hindenburg Research disclosed its short position.
Asian chip stocks fall
Asia-Pacific markets fell on Thursday as Asian technology and chip-related stocks fell sharply. Investor disappointment over Nvidia’s earnings has exacerbated the decline in Nvidia’s stock price, which has dragged down companies involved in Nvidia’s supply chain. SK Hynix fell about 5.3%, and Samsung Electronics fell 3.1%.
The new chip war
According to the International Energy Agency, China’s electric vehicles dominate, accounting for 60% of the global market share. Now, Chinese EV companies are turning to in-house designed automotive chips that will power features such as driver assistance and infotainment to further differentiate themselves and solidify their market share.
(PRO) Discount giant, discount inventory
Shares of Chinese e-commerce giant Pinduoduo plunged nearly 29% on Monday and continued to fall in subsequent trading days. Analysts weigh in on the reasons behind Pinduoduo’s share price decline and whether the current lower price might be a good opportunity for investors to get involved.
bottom line
If the chipmaker’s performance over the past year has led retail investors to expect the company to beat expectations, is it fair to say Nvidia beat expectations?
In the recently ended quarter, Nvidia achieved revenue of $30.04 billion, above expectations of $28.7 billion. Even better, the company said it expects revenue of about $32.5 billion for the quarter, beating analysts’ estimates of $31.7 billion.
Nvidia Chief Financial Officer Colette Kress said the increase is because the company expects “Blackwell revenue to reach billions of dollars.” Blackwell is Nvidia’s next-generation artificial intelligence chip.
This is all good news, right? So why did Nvidia’s stock price drop more than 7% in after-hours trading?
Dark clouds are gathering: Nvidia’s gross profit margin fell to 75.1% this quarter from 78.4% in the previous quarter; the company also said it expected the full-year gross profit margin to be “around 70%.”
That was probably the only number that came in below consensus expectations. Analysts expected full-year profit margins of 76.4%.
Shrinking profit margins mean revenue won’t grow as quickly even if it surges. So that’s legitimate cause for concern.
Nvidia’s earnings report was released after the bell, but it unnerved investors and dragged U.S. stocks lower on Wednesday.
Investors are broadly concerned about the sustainability of Big Tech’s boom. High-tech Nasdaq Index down 1.12%, S&P 500 Index down 0.6%, Dow Jones Industrial Average down 0.39%.
Nvidia’s impact on the broader market is likely to be more pronounced when U.S. trading reopens on Thursday. John Marshall of Goldman’s derivatives research team said in a note to clients that the options market “implies a +/- 10% move post-earnings, above the 7% average in the fourth quarter.”
When you expect more than you expect, you actually have two hurdles to clear. This may put unfair pressure on the company and its stock.
——CNBC’s Kif Leswing and Jesse Pound contributed to this report.
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