Nvidia’s recent financial projections have cast a shadow over the “Magnificent Seven” technology stocks, as investors expressed disappointment despite the company’s robust revenue outlook.
Following its quarterly forecast on Thursday, Nvidia’s (NVDA.O) stock price experienced a decline of over 8%, stirring unease among investors already wary of the “Magnificent Seven” group. This group, which includes giants like Microsoft (MSFT.O) and Amazon (AMZN.O), has faced increasing market skepticism in recent months.
The stock closed at $120.15. This downturn follows a period where Nvidia’s earnings were expected to fuel further gains, mirroring the AI rally of the past two years.
While the company anticipates approximately $43 billion in total revenue for the first quarter, exceeding market estimates, this growth shows a slowdown. The projected revenue increase of 65% is notably lower than the triple-digit growth investors had become accustomed to in previous years. Furthermore, Nvidia expects its gross margin to decrease to 71%, representing the lowest level in a year.
Nvidia’s performance is often seen as an indicator of the health of AI spending. The two-year boom in the AI market has significantly elevated Nvidia’s valuation to over $3 trillion and investors had hoped that these results would reignite the rally that has stalled since the “Magnificent Seven” reached their peak in late 2024.
The recent emergence of DeepSeek, a Chinese startup, has raised questions about the substantial investments allocated by major tech companies towards AI infrastructure. The market has also been rattled by the fact that many of these stocks have yet to fully recover from recent losses.
Concerns over potential cutbacks in spending have already led to significant market fluctuations. Fears regarding Nvidia’s most expensive AI chips wiped out more than half a trillion dollars of its stock-market value in a single day last month. More recently, a report suggesting Microsoft had reduced data-center leases further fueled concerns surrounding tech company spending.
As an indicator of chip spending on generative AI, Nvidia’s report, while indicating that demand remains strong, did not fully dispel investor concerns, with many hoping for more.
“(The) results and guidance were relatively in line with market expectations − not bullish enough to see another beat and raise,” said HSBC Global Research analyst Frank Lee.
Nvidia expects total revenue of $43 billion, plus or minus 2%, for the first quarter, which is in line with analysts’ consensus estimate.
