Nvidia plunges over 8% post earnings on profit-taking, margin worries

Investing.com -- Nvidia shares tumbled Thursday despite reporting fourth-quarter results that topped estimates and delivering better-than-expected revenue guidance for the current quarter, stoking optimism on demand outlook for the chipmaker’s next-generation AI Blackwell chips.

Nvidia (NASDAQ:NVDA) stock closed down 8.5% to  $120.15, its most significant one-day drop since the DeepSeek fallout in late January. The downside action is being attributed to profit-taking after massive multi-year gains and worries about the near-term margin drop on the Blackwell ramp.

For the three months ended Jan. 26, the company announced fourth-quarter adjusted earnings per share of $0.89, up from $0.81 in the same period a year earlier, on revenue of $39.3 billion, up 78% from a year ago. Analysts polled by Investing.com anticipated per-share income of $0.84 and revenue of $38.16 billion.

Nvidia’s data center unit, which makes up the bulk of revenue, posted revenue of $35.6 billion, up 16% from the prior quarter, beating estimates for $34.1 billion.

The company forecast fiscal 2026 first-quarter revenue of $43 billion, plus or minus 2%, above projections of $42.05 billion. Gross margin for the period is seen at 70.6%, lower than the 75% margins witnessed in the fiscal year 2025.

"We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter," Nvidia said.

The better-than-expected guidance stoked optimism about demand for the company’s next-gen AI Blackwell chips and also alleviate concerns somewhat about rising competition for enterprise spending from Chinese AI firms including Deepseek.  

The emergence of DeepSeek’s low-cost artificial intelligence model had weighed on Nvidia recently amid investor worries about a sharp decline in AI spending, because "the new models cost far less to train and use than those made by Western counterparts," analysts at Truist Securities said in a note ahead of the earnings report.

On the conference call, CEO Jensen Huang reiterated that post-training for AI is driving demand. He noted that post-training requires more computing power because reasoning models need more resources.

Huang added that next-generation AI models would be even more thoughtful, and post-training could require hundreds, thousands, or perhaps millions more computing power.

Blackwell was designed for post-training and the company is more enthusiastic about the Blackwell ramp, Huang said.  

Commenting on whether gross margins will bottom in the first quarter, CFO Colette Kress said gross margins will be in the low-70s during the Blackwell ramp due to Nvidia’s commitment to building out manufacturing. Once it fully ramps, gross margins can improve to the mid-70s later this year, Kress said.

Discussing the future of AI, Jensen highlighted that the world has only recently tapped consumer AI.  The next wave is coming: agentic AI, physical AI, and sovereign AI.

Most analysts were optimistic about the stock following results, however, there was one outlier.  Summit Insights analyst Kinngai Chan downgraded NVIDIA from Buy to Hold. "While we think the datacenter capex growth for the training market will continue to benefit NVDA, we believe the lower computing power requirement for inference while not evident today, will undoubtably have a negative impact to NVDA’s financial performance in the medium to longer-term," the analyst said.  "We believe NVDA’s outperformance and growth could decelerate into 2HFY26 as supply of NVDA’s GPUs catches up to industry demand."

Elsewhere, BofA Securities analyst Vivek Arya raised the price target on NVIDIA to $200 from $190 while maintaining a Buy rating.  The stock is a top pick at the bank due to its AI dominance, "leading the AI market towards compute-intensive inference, agentic applications, and physical AI/robotics." Further, they see the valuation as "compelling" at 29x this year’s EPS and 22x next year’s.

(Yasin Ebrahim and Scott Kanowsky contributed to this report)