NVIDIA shares down 2.6% on China trade concerns
After what were good quarterly earnings and a positive outlook for the fourth quarter, NVIDIA stock closed down in what was a volatile after-hours trading session.
Despite earnings, sales and forecast above Wall Street's expectations, traders acted on the group's sales expectations in China in the wake of new US rules. NVIDIA is set to take a hit from the vastly expanded US export controls on what the company can sell to China. Sales of the affected chips made up nearly a quarter of NVIDIA’s data center sales in the past few quarters. Another source of concern for NVIDIA is Israel, where its networking business is headquartered. The chipmaker said a significant portion of its employees based in Israel have been called up to active military duty, and if the war continues, their absence could hurt its future operations.
(AI Video Transcript)
NVIDIA
NVIDIA , a top company in AI chip-making, saw its stock decline by 2.6% after releasing its earnings report. Surprisingly, this drop wasn't because the company didn't perform well financially. In fact, its third-quarter revenue tripled to $18.12 billion, surpassing expectations. The data center segment even had a remarkable 41% increase to $14.5 billion. NVIDIA also predicted even better revenue of $20 billion for the next quarter, while analysts only expected $17.9 billion. Despite these great numbers, investors became worried about the company's sales prospects in China. Their concerns were mainly due to the expanded U.S. export controls on sales to China. Approximately 25% of NVIDIA's data center sales come from chips affected by these controls. As a result, the stock dropped by 2.9%, moving away from its near-record highs.
NVIDIA's stock
Throughout the year, NVIDIA's stock has made an incredible increase of 267.75%. Nevertheless, there has been a slight pullback recently. Another issue for the company is the situation in Israel, where NVIDIA's networking business is located. Many of their employees in Israel have been called up for military service, and if the conflict continues, their absence could impact NVIDIA's operations in the future.
Unfortunately, these factors combined resulted in a 2.9% decline in NVIDIA's stock at the end of the trading day, which also had a negative impact on the broader U.S. markets the following day. To put it simply, NVIDIA had a fantastic quarter in terms of revenue and exceeded expectations. However, concerns about future sales in China and the impact of military service on its operations in Israel caused the stock to drop. Despite this decline, NVIDIA's overall performance throughout the year has been outstanding.
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