Over One Trillion Market Value Evaporates As Nvidia Reports Strong Results But Shares Plunge
After U.S. market close on Wednesday, Nvidia released quarterly results that demonstrated exceptional performance: fourth‑quarter profit nearly doubled and revenue reached a record high.
Despite the robust financials, the company’s share price moved sharply lower. Nvidia, widely regarded as a leading beneficiary of the artificial intelligence boom, declined in after‑hours trading on Wednesday and closed down 5.5% on Thursday, marking its largest single‑day drop since April of last year and erasing approximately USD 260 billion (about RMB 1.7 trillion) in market capitalization overnight. Other major semiconductor names also fell, with Broadcom down more than 3%, AMD off 3.41%, and TSMC down 2.8%.
Market observers point to a persistent pattern in Nvidia’s post‑earnings performance. Since August 2024 the stock has tended to open lower the day after earnings releases, a phenomenon some attribute to the market’s diminished surprise at Nvidia’s results. The company has consistently exceeded profit expectations each quarter over the past three years, raising investor expectations to a level where even outstanding results are treated as routine.
Sentiment on Wall Street has shifted, particularly regarding AI spending and Nvidia’s concentration of demand. Mike O’Rourke, Chief Market Strategist at JonesTrading, commented after the earnings call that investors perceive emerging risks despite the strong numbers. Nvidia’s Chief Financial Officer, Colette Kress, acknowledged that in 2026 the top five global cloud providers and hyperscale cloud companies accounted for more than half of the company’s data‑center revenue, reinforcing concerns about demand concentration. During the call, CEO Jensen Huang was asked how confident he was that customers would continue to invest hundreds of billions in Nvidia chips; he expressed confidence in customers’ cash‑flow growth. Critics, however, note that recent earnings from major hyperscalers such as Amazon, Meta, Microsoft and Google showed free cash flow that was either sharply down or broadly flat, a reality that some market participants say is inconsistent with management’s tone. As O’Rourke observed, a lack of candor on well‑known issues can heighten investor anxiety about unknown risks. Janus Henderson portfolio manager Richard Clode said the debate has shifted from near‑term results to the sustainability of AI capital expenditure, with concerns centering on Nvidia’s scale, monetization and potential cash‑flow deterioration.
Pressure intensified after commentary from investor Michael Burry, who highlighted Nvidia’s purchase obligations—contractual commitments to procure goods within specified timeframes. That figure rose from USD 16 billion a year earlier to USD 95 billion in the latest filing, a jump Burry attributed to supplier requirements, notably from TSMC, for greater upfront cash to produce Nvidia’s complex custom chips. Burry argued that Nvidia is effectively committing to non‑cancelable orders before demand is fully visible, a structural shift that could pose material risk if downstream demand softens.
Investor unease was compounded by the absence of clear forward guidance. Nvidia’s 10‑K filing noted ongoing negotiations with OpenAI regarding an investment and cooperation agreement but stated there is no assurance such an agreement will be reached or completed. Tom Graff, Chief Investment Officer at Facet, said that while the market broadly expected a strong quarter given anticipated data‑center spending by Microsoft and Amazon, investors sought more definitive guidance and were disappointed. Graff observed that if companies like OpenAI are moderating spending, that would likely be reflected in revenue over the next one to two quarters, and the lack of specific revenue outlook is therefore a concern.
