Nvidia reported strong quarterly results after the close on Wednesday but said its third-quarter gross profit may fall short of market expectations, dampening investor hopes that have driven a surge in the AI chip giant's shares.
Shares of the Santa Clara, California-based company have risen more than 150% this year but closed down 2% in regular trading and were down 3% in after-hours trading.
The world's second-most valuable company, led by Chief Executive Officer Jensen Huang, now expects third-quarter sales of $32.5 billion, compared with analysts' average forecast of $31.77 billion, a slight hit, according to LSEG data.
The company reported revenue of $30 billion for the three months ending in July, up 15% from the previous quarter and 122% from a year ago.
Nvidia added that it expects billions of dollars in revenue from its latest Blackwell chips in the fourth quarter, addressing widely reported concerns that production delays are hindering growth.
The world's second-most valuable company, led by Chief Executive Officer Jensen Huang, expects third-quarter sales of $32.5 billion, compared with analysts' average forecast of $31.77 billion, according to LSEG data.AP
Nvidia's shares have soared more than sevenfold over the past two years, and investors have high hopes for the chipmaker, making it one of the biggest beneficiaries of a rally in AI stocks.
The company's second-quarter results were so much talked about that a private watch party for the company's livestream event was held at an Irish pub in Manhattan.
The California tech giant, which makes the semiconductors that power artificial intelligence technology, briefly became the world's most valuable company in June, overtaking Microsoft and Apple.
Investors have high hopes for the chipmaker after Nvidia's shares surged more than sevenfold over the past two years, making the company one of the biggest beneficiaries of a rally in AI stocks. Anadolu Agency via Getty Images
The company's market capitalization of $3.1 trillion is second only to the iPhone maker's $3.4 trillion.
Nvidia controls about 80% of the market for AI chips, which includes custom AI processors made by cloud computing companies such as Google, Microsoft and Amazon.
“[Nvidia]is a huge contributor on its own to the overall profitability of the S&P 500,” said Steve Sosnick, chief strategist at Interactive Brokers. “It's Atlas that's propping up the market.”
Earlier this week, The Washington Post was one of many outlets to report on the company's highly competitive work environment.
Current and former Nvidia employees quoted by Bloomberg described “pressure-inducing” demands, including seven-day work weeks, long hours that often ended at 2 a.m. and frequent shouting matches and fights in meetings.
However, the company boasts relatively low turnover because it offers employees stock grants that typically vest over four years.
Nvidia's stock price has soared 3,776% since 2019, and employees who have worked for the company for the past five years are likely to become millionaires.
The Santa Clara-based tech company prides itself on having extremely low employee turnover, and the company's soaring stock price has made many long-time employees millionaires. Getty Images
This generous stock compensation plan provides a strong incentive for employees to persevere through tough times and stay with the company.
Hwang, whose net worth is estimated at $111 billion according to the Bloomberg Billionaires Index, claims he is reluctant to fire employees, preferring instead to “work them hard to make them great.”
He said his approach to employees has been key to Nvidia's success.
“When you fire someone, many people say, 'It's not your fault,' or 'I made the wrong choice,' or 'There are very few jobs,'” Huang said in a June interview, when asked why he doesn't fire people.
Last year, 5.3% of employees left Nvidia, but after the company's market capitalization surpassed $1 trillion, employee turnover dropped to just 2.7%.
Employee turnover is much higher in the semiconductor industry, at 17.7 percent, according to the company.
An employee who has been with the company for 10 years has enough money to retire, but chooses to stay on in anticipation of a larger windfall when their next stock grant vests.
Bloomberg reported that the company's newly millionaire employees were bragging about the new vacation homes they'd bought and tickets to the Super Bowl and NBA Finals.
