Focus on the BIG picture.
Wednesday, Sep 10, 2025
Outside the box.
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
After a string of outsized earnings surprises, Nvidia’s latest results and guidance landed closer to consensus, while supply limits, power constraints and rising competition temper the breakneck pace that defined the early AI boom.
Nvidia, the semiconductor group whose explosive growth made it the emblem of the artificial-intelligence investment cycle, is confronting a comedown from its era of towering earnings beats.
Recent quarterly results still surpassed forecasts, but by slimmer margins than in 2023–24, and management’s outlook has hewed nearer to analyst expectations—prompting investors to reassess the durability of the company’s "wow" factor.
The latest update underscored the shift.
Nvidia reported revenue in the mid-forties of billions of dollars and projected the next quarter in the mid-fifties of billions—only modestly above consensus—versus prior periods when guidance arrived dramatically ahead of the Street.
Shares have been volatile as the beat-and-raise cadence moderates.
Several structural frictions are visible.
At the supply end, advanced AI systems depend on complex manufacturing and integration chains anchored by Taiwan Semiconductor Manufacturing Company and a web of component suppliers, with reported delays and product-cycle hiccups—most notably around the transition from Hopper to Blackwell—occasionally rippling through deliveries.
Partners have acknowledged schedule pushouts, even as Nvidia says it is tightening its annual cadence.
On the demand side, hyperscalers and enterprises continue to invest heavily in AI, but practical constraints—chief among them power availability for new data centers—are imposing sequencing on deployments.
Utilities’ ability to add capacity and the time required for grid upgrades have become gating factors for the speed of AI build-outs, even as Nvidia’s newer platforms improve performance per watt.
Competition is intensifying around the edges of Nvidia’s dominant accelerator franchise.
Rival silicon from established suppliers and custom chips commissioned by large cloud providers are expected to claim a larger slice of future AI compute, and some analysts have trimmed price targets to reflect incremental share risk—even while maintaining positive long-term views on the market’s overall expansion.
Investors are also watching margins.
After a surge to unusually high gross margins during the initial AI scramble, commentary around future profitability has turned more cautious as pricing normalizes across product cycles and as mix shifts toward new platforms.
The company still prints exceptional absolute profits, but the slope of further margin gains is a focal point for the next leg of the story.
None of this detracts from Nvidia’s scale advantage in software, ecosystem depth and developer mindshare, which remain formidable.
But the market’s message is clear: as the AI build-out moves from a sprint to a marathon, expectations are being re-anchored to reflect logistical realities, a more competitive field and guidance that no longer shocks the consensus every quarter.
Recent quarterly results still surpassed forecasts, but by slimmer margins than in 2023–24, and management’s outlook has hewed nearer to analyst expectations—prompting investors to reassess the durability of the company’s "wow" factor.
The latest update underscored the shift.
Nvidia reported revenue in the mid-forties of billions of dollars and projected the next quarter in the mid-fifties of billions—only modestly above consensus—versus prior periods when guidance arrived dramatically ahead of the Street.
Shares have been volatile as the beat-and-raise cadence moderates.
Several structural frictions are visible.
At the supply end, advanced AI systems depend on complex manufacturing and integration chains anchored by Taiwan Semiconductor Manufacturing Company and a web of component suppliers, with reported delays and product-cycle hiccups—most notably around the transition from Hopper to Blackwell—occasionally rippling through deliveries.
Partners have acknowledged schedule pushouts, even as Nvidia says it is tightening its annual cadence.
On the demand side, hyperscalers and enterprises continue to invest heavily in AI, but practical constraints—chief among them power availability for new data centers—are imposing sequencing on deployments.
Utilities’ ability to add capacity and the time required for grid upgrades have become gating factors for the speed of AI build-outs, even as Nvidia’s newer platforms improve performance per watt.
Competition is intensifying around the edges of Nvidia’s dominant accelerator franchise.
Rival silicon from established suppliers and custom chips commissioned by large cloud providers are expected to claim a larger slice of future AI compute, and some analysts have trimmed price targets to reflect incremental share risk—even while maintaining positive long-term views on the market’s overall expansion.
Investors are also watching margins.
After a surge to unusually high gross margins during the initial AI scramble, commentary around future profitability has turned more cautious as pricing normalizes across product cycles and as mix shifts toward new platforms.
The company still prints exceptional absolute profits, but the slope of further margin gains is a focal point for the next leg of the story.
None of this detracts from Nvidia’s scale advantage in software, ecosystem depth and developer mindshare, which remain formidable.
But the market’s message is clear: as the AI build-out moves from a sprint to a marathon, expectations are being re-anchored to reflect logistical realities, a more competitive field and guidance that no longer shocks the consensus every quarter.
