Why has Nvidia’s stock started to fall this week?

Nvidia, the giant U.S. chip maker, has seen a 4.7% fall in its stock price since Friday’s closing bell ahead of the company’s earnings report later today (Feb.21).

Nvidia is on a blistering run, it has been one of the best-performing stocks of 2024 so far, up 44.2% year-to-date and an eye-watering 236.6% over 12 months.

What’s driving this incredible growth? Well, like many other Big Tech companies, it’s Nvidia’s part in the artificial intelligence (AI) revolution we see happening at the moment. Like those who sold pickaxes during a gold rush, Nvidia provides the essential GPU hardware that enables and powers the AI industry’s explosive growth.

Here's what you need to know ahead of Nvidia's earnings report: https://t.co/Z5iZSdftQ2 pic.twitter.com/x6llLr4YZj

— CNBC (@CNBC) February 21, 2024

But with quarterly results expected in a few hours it seems like investors aren’t confident the company can sustain this level of growth in the short term.

Frank Lee, head of technology research at HSBC, told Reuters, “The market is maybe a little bit hesitant whether they (Nvidia) can deliver a strong enough guidance to reinvigorate the market even higher.”

According to London Stock Exchange Group (LSEG) estimates, analysts forecast that earnings per share will be $4.56 and that revenue will increase to $20.378 billion, up from $6.05 billion one year ago.

However, this astronomical figure and the potential for company stock to rise 50% every two months, “cannot be sustained” according to Barron’s Tae Kim.

Nvidia stock at all-time-high

According to Barron’s recent predictions on the company’s potential earnings report Nvidia’s stock has climbed 1783% across the past five years. This coincides with the race to be the leading force in the AI chip sector and the United States’s third most valuable company behind Microsoft and Apple.

The company also delivered a successful Computer Electronics Show (CES) that displayed the new RTX 40 series GPUs, introducing the RTX 4080 Super, RTX 4070 Ti Super, and RTX 4070 Super. These more affordable and better-performing options have been a protracted attempt to battle competitor AMD in the gaming and performance device scene.

There is also the rumor of the codenamed Blackwell or B100 chip to be in development with a Q4 2024 – Q1 2025 release window. This chip would usher in an entirely new era of graphics cards, and could potentially stay the hands of investors waiting to see how the current Nvidia chips and those on show at CES will perform.

Although, other chipmakers faced recent share dips as rival Advanced Micro Devices (AMD) was down 1.3% in premarket trading and Intel was down 0.4% this week, showing this dip in collective AI leaders might not be exclusive to Nvidia.