Over the past few years, the stock has regularly rewarded investors, frequently exceeding expectations. However, despite yesterday's stellar quarterly report, the stock ended the day in the red and continued to decline in after-hours trading, alarming a lot of investors.

Markets have a tendency to anticipate, with regards to Nvidia, the response from the market indicates concerns expressed in the quarterly report. Some of these concerns include production issues with Blackwell, the ROI due to investing in AI, and Q3 revenue (even though beat, fell a little short of Wall Street’s optimistic estimates).

Furthermore, there are many drawbacks to high prices. Initially, high current values imply lower anticipated future returns. Secondly, at high prices, the best-case scenario is already factored in.

This brings us to our second point: expectations drive market movement. When a company is valued at 70 times profits and over 40 times revenues, the best-case scenarios are probably already included in those prices.

It doesn't take much to undermine self-assurance and destroy seemingly indestructible beliefs.

Finally, keep in mind that it is difficult to achieve $5 or $10 trillion in stock value when it is already above $3 trillion. Hence, with Nvidia already having provided astronomical gains over the last 20 months, it is harder for a company in its position to grow at the same pace. For example, sometimes it could be relatively easier for a stock valued at $10 billion today, to reach $80 or $100 billion in the short-medium future. Compared to a stock already worth trillions.

Behavioural finance and data are constantly at the centre.

Despite the fall, many on Wall Street have already reiterated their price target with some stating ‘buy the dip’. More on this and a deeper dive into Nvidia’s earnings can be found on our previous article here https://minipip.co.uk/details/news/2898

(Sources: investing.com)