Nvidia’s shares experienced a minor downturn in extended trading on Wednesday, trimming earlier gains, even after the company issued a positive forecast for its first-quarter revenue. This outlook suggested that the demand from major tech companies heavily invested in artificial intelligence (AI) infrastructure, such as Microsoft and Amazon, remains strong. However, the news failed to entirely quell concerns about the potential for overspending in the rapidly expanding AI industry.
Shares of Nvidia edged down 0.18% in Frankfurt on Thursday, following a 1.5% drop in New York after the dominant AI chipmaker projected quarterly revenue above analysts’ estimates. The reaction was muted, with shares of Microsoft, Amazon, Meta Platforms, and Alphabet – some of Nvidia’s largest customers – remaining largely unchanged. These companies, part of the so-called “Magnificent Seven” stocks, have delivered substantial returns amid the race to dominate emerging AI technology following the introduction of ChatGPT in November 2022.
More recently, investor caution has increased as several of these stocks have stumbled, particularly after China’s DeepSeek announced significant AI performance at a reduced cost. While Nvidia reported a 78% surge in quarterly revenue, it also indicated that its first-quarter margin would tighten to approximately 71%, down from 73.5%, falling short of the 72.2% anticipated by analysts. This adjustment comes as Nvidia ramps up production of its new flagship Blackwell AI chips.
“Despite market concerns about DeepSeek’s efficient model and early challenges with Blackwell deployment, Nvidia’s results confirm its continued leadership in the AI landscape,” stated Jacob Bourne, an analyst at eMarketer. “Competitors are advancing, but frontier models require the advanced computing resources that Nvidia provides.”
However, the highly anticipated earnings report from Nvidia was met with a lukewarm reception from technology companies in Asia. Shares of Taiwan Semiconductor Manufacturing Co (TSMC), Nvidia’s primary chip supplier, fell 0.47%, while South Korean chipmakers Samsung Electronics and SK Hynix declined by 0.18% and 1%, respectively. Tokyo’s Nikkei technology sub-index saw a modest increase of 0.2%.
“Nvidia’s earnings came with much less volatility than expected. The absence of major surprises may have kept sentiment relatively calm,” noted Yeap Jun Rong, a market strategist at IG.
The unveiling of low-cost AI models from DeepSeek last month fueled fears of a potential downturn in spending on Nvidia’s high-end AI chips and wiped out over half a trillion dollars of its stock market value in a single day, a record on Wall Street. Adding to investor worries, an analyst report suggested that Microsoft was scaling back some data center leases.
The Magnificent Seven stocks have retreated from their late-2024 peaks, and the group is now in correction territory. The Roundhill Magnificent Seven ETF is down more than 11% from its December 17 closing high. Nvidia has consistently outperformed analyst predictions over the past two years, although the magnitude of its revenue beats has diminished as it faces demanding comparisons from robust growth a year ago.
“DeepSeek unsettled investors, but given Nvidia’s first-mover advantage and the substantial infrastructure investment plans of tech giants like Meta, it signals that Nvidia’s high-end chips will continue to be in demand,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The Magnificent Seven stocks collectively added roughly $11 trillion in market capitalization from the launch of ChatGPT in November 2022 through their combined peak in mid-December 2024. Nvidia alone contributed $2.7 trillion to this increase, securing its position as the world’s second-most valuable company at $3.2 trillion. Nvidia’s stock has surged approximately 1,800% over the past five years. During the same period, the Magnificent Seven stocks on average more than tripled in value, while the benchmark S&P 500 gained approximately 65%.
