Nvidia Q4 Earnings Report Projects Tighter Profit Margins, Fails to Quell Investor Fears
Nvidia’s earnings report suggests that demand for AI remains robust. The tech giant released its quarterly report on February 26. According to Reuters, the report indicates that AI infrastructure that heavyweights like Microsoft and Amazon are building is still relevant. However it fell short of quelling investor fears of overspending in the industry.
Tighter Profit Margins
Nvidia Q4 results reflected a 78% increase in the tech company’s quarterly revenue. Even with this increase, Nvidia projected that its quarter one profit margins will reduce from 73.5% to 71%. These estimations are slightly lower than the 72.2% projected by analysts. Nvidia’s conservative profit projects come at a time when the company is increasing production of Blackwell AI chips.
“Despite market jitters over DeepSeek’s efficient model and early Blackwell deployment challenges, Nvidia’s results reaffirm that it continues to lead the AI landscape. Competitors are making strides but frontier models require the kind of advanced computing resources that Nvidia provides,” eMarketer Analyst Jacob Bourne.
Less Market Volatility
The impact of the company’s earnings report was reflected in Nvidia’s stock performance across the globe. On February 26, Nvidia shares lost 1.5% in New York stock exchange following the chip manufacturer’s quarter one revenue forecast that was above estimates by Wall Street analysts.
Nvidia’s largest clients like Meta, Microsoft, Alphabet, and Amazon have not changed their orders. The chip manufacturer expects these companies to boost its data center chip sales in the coming quarters. US big tech stocks have yielded high returns as they work towards dominating the AI industry after ChatGPT launched in November 2022. Last month, the stocks tumbled following the launch of China’s DeepSeek.
The Chinese AI startup claimed that it had achieved high AI performance at a much lower cost, causing investors to take caution.
In Frankfurt, Nvidia shares dropped by 0.18% on February 27. Generally, Nvidia’s quarter four earnings report received a dull response from Asian tech companies. The Nikkei tech sub-index in Tokyo gained 0.2%. Stocks for Nvidia’s top chip supplier, Taiwan Semiconductor Manufacturing Company dropped by 0.47% on the same day. Stocks of SK Hynix and Samsung Electronics dipped by 1% and 0.18% respectively.
“Nvidia’s earnings came with much less volatility than expected. The absence of major surprises may have kept sentiment relatively calm,” IG Market Strategist Yeap Jun Rong said.
Market Outlook
For the last two years, Nvidia AI dominance has seen its earnings surpass analyst estimates. However, its profit margin estimates have reduced due to the tough comparisons it now faces from the strong growth it experienced in the previous year.
“DeepSeek rattled investors, but given Nvidia’s first-mover advantage and the huge infrastructure investment plans from tech giants like Meta, it’s an indication that Nvidia’s high-end chips will remain in demand,” Hargreaves Lansdown Head of Money and Markets Susannah Streeter said.
The emergence of DeepSeek’s AI model early in the year raised concerns that tech companies might change their mind about spending on Nvidia’s costly AI chips. The market sell-off triggered by the Chinese AI chatbot caused Nvidia to lose over $600 billion in market valuation within a day.
Analyst reports also show that Microsoft may be terminating some of its data center leases.
In the US, big tech stocks have added close to $11 trillion in market capitalization between December 2024 and November 2022 when OpenAI unveiled ChatGPT. Nvidia alone has added about $2.7 trillion in market capitalization, turning it into the second-most valuable firm in the globe. The company’s current market valuation is about $3.2 trillion.
Over the last five years, Nvidia stocks have gained about 1800%. Overally, US big tech stocks have more than tripled in the same period while the S&P 500 index has gained 65%.
