Jensen Goes on the Defensive

Another quarter, another (almost) blowout earnings report from chip giant Nvidia. But this time, Wall Street isn’t too appreciative.

Nvidia stock opened Thursday morning down a few percentage points, following a slightly bigger sell-off in after-hours trading Wednesday night during Nvidia’s call. What gives? After all, revenue in the last quarter soared 122% to $30 billion from a year earlier, driven by sales of the chips needed to train and run conversational AI. (For more details on the results, check out these stories and newsletters from yesterday.)

There’s a few things going on. Notably, Nvidia’s gross profit margin—which has steadily ascended over the past eight quarters—dipped a few percentage points to a still-spectacular 75% in the quarter. While some of that was due to Nvidia having to write off inventory on low-yielding Blackwell hardware—a result of a design flaw with the upcoming chip we first wrote about here—Nvidia had actually forecasted a mid-70s gross margin for this point of the year back in February.

At that time, Nvidia CFO Colette Kress was cryptic about the decline, saying only that the uptick above 75% in the fourth quarter of last year (and, later the first quarter of this year) was due to “favorable component cost in the supply chain.” On Wednesday, aside from the Blackwell issue, Kress attributed the decline “to a higher mix of new products within Data Center,” which implies that newer chips on the way such as Blackwell are more expensive to make.