NVIDIA Just Smashed Earnings... So Why Stock Market Still Terrified?

NVIDIA, the tech giant synonymous with artificial intelligence (AI), reported its fourth-quarter earnings on Wednesday, February 26, 2025. Despite smashing analyst expectations, the company's stock price plummeted by 8.5%, marking its steepest post-earnings drop since November 2018. This begs the question: why is the stock market still terrified of NVIDIA?



NVIDIA's earnings report was a mixed bag. On one hand, the company reported record revenue of $39.3 billion, up 78% year-over-year, and record earnings per diluted share of $0.89, up 82% year-over-year. The data center segment, a significant driver of NVIDIA's AI-related sales, reported record revenue of $35.6 billion, up 93% year-over-year. Additionally, NVIDIA successfully ramped up the production of its Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter.

On the other hand, NVIDIA's guidance for the first quarter of fiscal 2026 fell short of analysts' expectations. The company projected revenue of $43.0 billion, plus or minus 2%, while analysts had expected $44.5 billion. This discrepancy likely contributed to the stock market's negative reaction.

The market's cautious stance towards NVIDIA can be attributed to several factors, including geopolitical tensions and the emergence of Chinese AI startup DeepSeek. The U.S. government has clamped down on exports of high-powered AI chips to China, putting billions of dollars of NVIDIA's quarterly sales to China at risk. Additionally, DeepSeek's announcement that it has developed a large language model that can compete with big U.S. rivals without using the most expensive chips has called into question the spending Wall Street had assumed would go into NVIDIA's chips and the ecosystem around the AI boom.



Billionaire fund managers, such as Philippe Laffont of Coatue Management, David Tepper of Appaloosa Management, Stanley Druckenmiller of Duquesne Family Office, and Stephen Mandel of Lone Pine Capital, have sold a combined total of over 100 million shares of NVIDIA stock since the first quarter of 2023. This persistent selling activity suggests that geopolitical tensions and the potential loss of Chinese sales are significant concerns for these investors.

In conclusion, NVIDIA's earnings report was a mixed bag, with strong financial performance overshadowed by cautious guidance. The market's negative reaction can be attributed to geopolitical tensions, the emergence of Chinese AI startup DeepSeek, and the potential loss of Chinese sales. Despite these concerns, NVIDIA remains well-positioned in the AI market, and its strong financial performance demonstrates the company's continued growth and success. As the market digests NVIDIA's earnings report and reassesses its expectations, investors will likely gain a better understanding of the company's prospects and the broader AI market landscape.