Shares in Nvidia have fallen despite the artificial intelligence (AI) chip giant comfortably beating expectations after more than doubling its sales.
Nvidia announced record revenues of $30bn (£24.7bn) over a three-month period.
The company has been one of the biggest beneficiaries of the AI boom, with its stock market value soaring to more than $3 trillion.
But while analysts have grown used to Nvidia producing “spectacular” sales growth, the latest results indicate “that rate of growth was starting to slow,” said Simon French, head of research at Panmure Liberum.
Analysts had forecast sales growth of $28.7bn for the three months to 28 July.
Nvidia surpassed this with revenues increasing by 122% compared to the same period last year.
But following the release of the results, Nvidia’s share price fell by 6% in after-hours trading in New York on Wednesday.
On Thursday, its shares were down about 2% in early trading, but its stock remains about 150% up so far in 2024, making it one of the big winners in the US market.
“It’s less about just beating estimates now,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Markets expect them to be shattered and it’s the scale of the beat today that looks to have disappointed a touch.”
Announcing the latest results, Nvidia chief executive Jensen Huang said: “Generative AI will revolutionise every industry.”
But Mr French told the BBC: “If you’re going to raise expectations that high then you’ve got to keep growing at spectacular rates.”
He added that while its current AI chip – called Hopper – is selling well, the next generation Blackwell chip “has faced some production delays and that perhaps is one of the reasons why Wall Street after hours sold off the stock”.
Nvidia’s results have become a quarterly event which sends Wall Street into a frenzy of buying and selling shares.
A “watch party” had been planned in Manhattan, according to the Wall Street Journal, while Mr Huang, famed for his signature leather jacket, has been dubbed the “Taylor Swift of tech”.
Alvin Nguyen, senior analyst at Forrester, told the BBC both Nvidia and Mr Huang have become the “face of AI”.
This has helped the company so far, but it could also hurt its valuation if AI fails to deliver after firms have invested billions of dollars in the technology, Mr Nguyen said.
“A thousand use cases for AI is not enough. You need a million.”
Mr Nguyen also said Nvidia’s first-mover advantage means it has market-leading products, which its customers have spent decades using and has a “software ecosystem”.
He said that rivals, such as Intel, could “chip away” at Nvidia’s market share if they developed a better product, though he said this would take time.