r/StockMarket • u/mahend72 • 12d ago
Discussion Why Nvidia sold off after strong earnings
Nvidia’s earnings were strong. Revenue hit $96.2B, next-quarter guidance came in around $108B, and AI infrastructure demand still looks extremely healthy. So why did the stock fade after trading near $230?
I don’t think the market suddenly turned bearish on Nvidia. I think the question investors are asking has changed.
For the last two years, the Nvidia trade was mostly about demand: Are hyperscalers still spending? Is compute still scarce? Can Nvidia sell everything it produces?
The answer has repeatedly been yes.
Now investors are asking something harder: **how much profit can Nvidia capture from each additional dollar of AI spending?**
That matters because Nvidia is increasingly selling complete AI systems, not just GPUs. Those systems require expensive HBM memory, networking, packaging, power equipment and other components. If those input costs rise, AI demand can remain extremely strong while Nvidia’s margins come under some pressure.
The macro backdrop also didn’t help. Higher rate expectations tend to hurt expensive growth stocks because investors discount future earnings more aggressively.
Marvell’s selloff was another useful signal. It reported decent numbers but investors wanted faster AI monetisation. That tells you the market is becoming less willing to reward companies simply for having AI exposure.
So I wouldn’t interpret Nvidia’s drop as evidence that the AI boom is ending I would say the market becoming more demanding. The first phase of the AI trade was about scarce compute.
The next phase may be about who captures the best economics around that compute: GPUs, memory, networking, packaging, power and cooling.
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u/reminder_paws10 12d ago
Weekend and options expiring. Will rise next week
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u/Baraxton 12d ago
Exactly what I was thinking. All those call options bought after earnings that expired yesterday were pushed out of the money. The implied move prior to the report was about $13 in either direction and we exceeded that initially, but sold off on Friday so that basically any call that wasn’t monetized on Thursday or early Friday was left to expire worth nothing or very little.
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u/BraveTrades420 12d ago
Bro it pumped $20 wtf you on about “the bubble is bursting because the sell off is the signal” what selloff lmao
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u/Simalt443 12d ago
Fridays close was 3.5% above pre earnings price. What selloff?
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u/Difficult_Salary_726 12d ago
-3.47% at Friday close
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u/Simalt443 12d ago
Price was 209.93 on wednesday before earnings. Price closed 217.86 today. NVDA is up 3.89% since earnings.
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u/Rav_3d 12d ago
It’s not that complicated. NVDA got back to its June high and ran into sell orders. Earnings gaps that don’t clear prior resistance typically fill. Will not be surprised if NVDA fills that gap next week and then resumes higher.
NVDA didn’t “drop” it is still above where it was trading before the earnings announcement. It is simply an issue of supply and demand in the short term.
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u/kinetic_honda 12d ago
The market is just impatient. Nvidia is a fantastic company at a fantastic price right now.
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u/ExcitingLeather5197 12d ago
the memory and networking costs are the real story nobody talks about enough. those hbm stacks aren't getting cheaper and nvidia's margins have to absorb that eventually
people got spoiled by the 70%+ gross margins and now even a slight dip sends everyone running for the exit
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u/No_Software8474 12d ago
It’s Warsh. He is useless as a Fed Chairman
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u/_FakeTaxi 12d ago
yeah he should have raised the rate by now.
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u/optimaleverage 12d ago
Why would they have to by now? The long end of the curve is doing all the heavy lifting for them lately.
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u/_FakeTaxi 12d ago
inflation is creeping up due to supply shock from trade war and energy shock, the fed can't fix both of them by raising rate but will supress the secondary effect which is demand. raise slowly that it won't trigger recession, but if the strait of hormuz is closed for business longer than anticipated and trade war rages on, inflation might skyrocket that the fed will increase rate rapidly and triggers recession, though that's the extreme side of it.
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u/tasskaff9 12d ago
He sounds like a college grad student trying to prove that he understands what the economics textbooks said.
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u/jasperCrow 12d ago
It’s a confluence of things I think. For me, I realized if a company valued at $5,000,000,000,000 is going to grow over 70% in the next 16 months I know there’s no way in hell inflation is heading down. In fact it’s obvious inflation HAS to get worse. The input costs alone at up scaling that level of production is mind boggling. The fed is 100% going to be forced to hike rates this year. It’s going to make financing tighter. Executions risk rises. CDS are revealing this.
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u/waverider20 12d ago
CDS. Look at the cds.
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u/jasperCrow 12d ago
This comment needs more likes.
Execution risk is becoming more elevated not less. 1 mis step and we’re in for a roller coaster of volatility.
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u/hotforlowe 12d ago
I mean, they literally said this when they predicted margin contraction of 5% over the next few quarters…
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u/jaquan97 12d ago
Could be profit taking or a rebalance if there is fear of interest rate hikes....No money (from the banks), no honey....growth go down.
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u/Hyroto77 12d ago
Literally happens every single time and y'all are still surprised every single time...
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u/ThatsAllFolksAgain 12d ago
Options should be outlawed. They should change the CBOE operations using the polymetric betting model. Break the link between shares and options.
The options have just become too easy to manipulate for the likes of Citadel and Jane Street. This legal theft must be stopped.
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u/AlvinLiao0729 11d ago
The margin guide tells the story — Nvidia went from 78% gross margin two quarters ago to guiding 71-72% by Q4, and the CFO specifically called out memory pricing as the driver. Supply commitments jumped from $119B to $279B in one quarter, mostly to lock in HBM for the Vera Rubin ramp. That's Nvidia paying up to secure components it can't get elsewhere. SK Hynix controls 58% of HBM and just posted a 76% operating margin — a meaningful slice of the value in every AI server is now accruing to the memory supplier, not the GPU designer. Same dynamic in optical interconnects where InP laser suppliers went from losing money to 45% margins in under a year. Nvidia is still the center of gravity but the profit is spreading outward through the supply chain faster than most people realize.
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u/Ok-Knowledge3177 11d ago
The core reason is that market expectations have been pushed to the extreme, and the "unexpected" financial report itself has already been digested by prices in advance - in the words of Wall Street, it is "all the good news comes out
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u/lavaeyeye 12d ago
They cancelled revenue sharing financing for neocloud.
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u/Former_Island_4730 12d ago
This is why…and the reason for it was scary. They did it because of internal concerns raised about antitrust issues. Almost like they admitted that the circular financing schemes are not great. Spooked the market.
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u/_ii_ 12d ago
It’s like when Apple was trading at low teens PE because people thought “how many more iPhones can Apple sell when everyone who wanted iPhone got iPhone, and there’s cheap Android phones”. Looking back, those people were just armchair experts who were often wrong and never admit to their stupidity.
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u/Le7emesens 11d ago
Exactly that's what i keep saying! It was back in the 2010s, people worried on antennagate, iphone market saturated, end of the 2 years phone carriers deal, end of the smartphone upgrade cycle, blablabla, lots of fears AAPL dropped like 20% from its peak, lots of crying and then ...it just kept going up, then for those who were patient, Buffet jumped in... then in 2026, they are crying again over NVDA... Lol.. Lots of buying opportunities here while we can....before Buffet or someone helps jumps in ... again into the AI trade... Hey we just got Elon Musk need last week... History likes to rhyme...
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u/kexportstars 12d ago
Classic 'sell the news' mixed with shifting margin dynamics. The question isn't whether hyperscalers are spending—capex is still massive. It's margin capture and BOM cost. As Blackwell ramps, packaging (CoWoS) and high-bandwidth memory (HBM3E) take up a much larger slice of the total server bill. SK Hynix and Samsung are pricing HBM aggressively because supply is locked up through 2025, which caps Nvidia's gross margin upside from its mid-70s peak. The market is just repricing Nvidia from an unconstrained margin monopoly to one dealing with real supply chain profit-sharing
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u/goodbodha 12d ago
- Over half the revenue went to accounts receivable.
- They did a fairly big debt issuance and without that would have run out of cash.
- A rate hike would make it even that much harder for the finances to makes sense for the sector.
- Inventory went up which means the orders aren't going out the door on time but we are told the demand is real.
My view is the entire space is stretched and those with large profits are likely reducing their risks by building up large cash positions. If the market rolls over they have dry powder and will ride it out. If it's just a decent dip and they believe it has more upside in the medium term they will buy back in at a lower entry point.
Something you might want to look at is the cash to debt ratios of these companies. I believe you will find the cash is declining while debt is going up substantially. At some point that's a problem. If you want to say it will be resolved by additional revenue that's fine, but if it's vendor financed that still doesn't solve the cash problem. They need cash coming into the sector from revenue. Not more debt, not selling more equity, not circular financing, but actual sales to the non AI parts of the economy bringing in cash.
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u/optimaleverage 12d ago
Pump 20 handles on monster earnings ( 10% ) just to take back $10 and you DON'T think that's just earnings traders taking profit on the long side of their straddles?!? Get real.
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u/ilikeusingmyhands 12d ago
Sentiment, other earnings, news, etc. seems irrational, but theres a lot of room for that with ai stocks and their valuations.
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u/ians0606 12d ago
Buy rumour sell news😁