Nvidia beats revenue expectations in boost to AI investment and US stock markets

The world's most valuable company, and first to be valued at $4trn (£2.9trn), beat market expectations in keenly anticipated financial results.

Microchip maker Nvidia recorded revenues of $46.7bn (£34.6bn) in just three months up to July, latest financial data from the company showed, slightly better than Wall Street observers had expected.

The company's performance is seen as a bellwether for artificial intelligence (AI) demand, with investors paying close attention to see whether the hype is overblown or if significant investment will pay off.

Originally a creator of gaming graphics hardware, Nvidia's chips help power AI capability - and the UK's most powerful supercomputer.

Nvidia's graphics processors underpin products such as ChatGPT from OpenAI and Gemini from Google.

Other tech giants - Microsoft, Meta and Amazon - make up Nvidia's biggest customers and are paying large sums to embed AI into their products.

Why does it matter?

Nvidia has been central to the boom in AI development and the surge in tech stock valuations, which has seen stock markets reach record highs.

It represents about 8% of the value of the US S&P 500 stock market index of companies relied on to be stable and profitable.

Strong results will continue to fuel record highs in the market. Conversely, results that fail to live up to the hype could trigger a market tumble.

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Nvidia itself saw its share price rise more than 40% over the past year. Its value impacts anyone with cash in the US stock market, such as pension funds.

The S&P 500 rose 14% over the past year, and the tech-company-heavy NASDAQ gained 21%, largely thanks to Nvidia.

As such, its earnings can move markets as much as major economic or monetary policy announcements, like an interest rate decision.

What next?

Revenue rises are forecast to continue to rise as Nvidia said it expected a rise to roughly $54bn (£40bn) in the next three months, more than the $53.14bn (£39.3bn) anticipated by analysts.

This excludes any potential shipments to China as export of Nvidia's H20 chip, designed with the Biden administration's export crackdown on advanced AI powering chips in mind, had been banned under US national security grounds.

But in recent weeks, Nvidia and another chipmaker, AMD, reached an unprecedented agreement to pay the Trump administration a 15% portion of China sales in return for export licences to send chips to China.

There were no H20 sales at all to China in the second quarter of the year, the period for which results were released on Wednesday evening.

Previously, 13% of Nvidia's revenue came from China, with nearly 50% coming from the US.

Market reaction

Despite the expectation-beating results, Nvidia shares were down by up to 3% in after-hours trading, as the massive revenue rises previously booked by the company were not repeated in the latest quarter, fuelling fears of a more persistent slowdown in growth ahead.

Compared to a year ago, revenues rose 56% and 6% compared to the three months up to April.

The absence of Chinese sales in forecasts appeared to disappoint.

But Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Smart investors will look through the noise. Nvidia has traded flat or down after results in four of the past five quarters, only to do all the heavy lifting after markets have had time to digest the results.

"The law of large numbers seems irrelevant here - despite its scale, Nvidia continues to defy expectations as consensus underestimates the opportunity at hand. Third-quarter revenue guidance at $54bn is a strong number, especially when it factors in no benefit from Chinese sales."

(c) Sky News 2025: Nvidia beats revenue expectations in boost to AI investment and US stock markets