Nvidia Stock Drops 2% as Chip Group Advances

Nvidia's stock price fell 2.01% to $225.73 on Tuesday, despite the broader chip group advancing by 1.3%. This divergence raises questions about whether Nvidia can meet its quarterly revenue target of $108 billion.

The company's operating numbers are still strong, with fiscal second-quarter revenue reaching $96.2 billion, a 106% increase from last year. Data Center revenue accounted for 92.5% of total sales, indicating extraordinary AI demand.

Nvidia's third-quarter midpoint is set at $108.0 billion, plus or minus 2%. Achieving this would require a 12.2% sequential increase in revenue. The company also expects a 74.0% gross margin at the midpoint, down from 75.0% in the second quarter.

The valuation of Nvidia's stock is high, trading at around 12.6 times its quarterly sales guide. This multiple leaves room for AI infrastructure spending to remain exceptional but leaves less room for growth to slow before investors receive earnings leverage.