The "convention" of exceeding expectations fails? The "myth" of Nvidia's (NVDA.US) high growth may not last

Nvidia's (NVDA.US) blowout quarter has left most companies green with envy, but after a 800%+ run in two years, "good" is no longer enough for Wall Street. The main issue is that the company's revenue guidance for the current quarter is just $400 million above analyst expectations, marking the second consecutive quarter that Nvidia's quarterly sales guidance has come in less than $1 billion or more below analyst averages, indicating that the blistering growth that fueled its run is rapidly dissipating.

While management promised "stunning" demand for its new Blackwell chips, that hasn't triggered the kind of price volatility many had expected. Shares were down 4% in premarket trading on Thursday, and were down 0.8% at the time of writing.

"The market has started to understand that Nvidia can't deliver these stellar results every quarter," said Quincy Krosby, chief global strategist at LPL Financial. "To see the kind of rebound we've seen in the past few quarters, you need to deliver something that's truly remarkable, something that's truly jaw-dropping."

Despite the extraordinary gap between the highest and lowest analyst sales estimates for Nvidia's fourth quarter, the fact that the average is relatively close to Nvidia's own forecast suggests that Wall Street has finally caught up with the company's financial performance after several quarters of severe underestimation.

Nvidia's guidance has exceeded expectations by more than $2 billion in each of the past four quarters, and by a stunning $3.8 billion in the second quarter of fiscal 2024, prior to the company's second quarter ended in July.

Investors had been preparing for a price move of about 8% in either direction in the options market. Nvidia's $360 billion market cap makes it the largest company in the world and the biggest component of the S&P 500, and its stock price move could have a significant impact on the index.

But Jamie Cox, managing partner at Harris Financial Group, sees the stock's breather as welcome and "healthy."