The aftermath of Nvidia’s second-quarter results was felt across Asia, with tech and chip-related stocks taking a hit. Companies with close ties to Nvidia, such as South Korean chipmakers SK Hynix and Samsung Electronics, experienced the most significant losses. SK Hynix, known for producing high bandwidth memory chips utilized in AI applications for Nvidia, saw its shares plunge by as much as 6.74%. Similarly, Samsung Electronics, a key player on South Korea’s Kospi index, witnessed a decline of up to 3.8%. While the exact extent of Samsung’s supplier relationship with Nvidia remains unclear, reports suggest that Samsung may be manufacturing high bandwidth memory chips for Nvidia products.
Direct suppliers to Nvidia, including Taiwan Semiconductor Manufacturing Company and Hon Hai Precision Industry (Foxconn), also faced losses in the wake of Nvidia’s results. Taiwan Semiconductor saw its shares drop by 2.8%, while Foxconn recorded a decline of 2.96%. This indicates that the ripple effect of Nvidia’s performance extended beyond the tech giant’s immediate partners.
The repercussions of Nvidia’s results were not limited to direct suppliers, as other tech stocks in Asia experienced a slight downturn. Japanese semiconductor-related companies like Renesas, Advantest, and Tokyo Electron saw their shares fall by 3.2%, 3.6%, and 3.49%, respectively. Similarly, Chinese chipmakers listed in Hong Kong, such as SMIC and Hua Hong Semiconductor, also witnessed a decline in their stock prices. Despite not being directly connected to Nvidia’s value chain, these companies were not immune to the overall negative sentiment in the market.
Although Nvidia exceeded expectations in terms of quarterly revenue and earnings per share, the market response was driven by concerns regarding its future growth prospects. Luke Rahbari, CEO of Equity Armor Investments, pointed out that while Nvidia’s results were impressive, there was a sense among investors that the company might not sustain its previous levels of explosive growth. This apprehension could explain the drop in Nvidia’s stock price following the earnings report.
Despite the temporary setback, analysts remain optimistic about Nvidia’s long-term prospects. Rahbari emphasized Nvidia’s dominant position in the industry, highlighting its unparalleled market presence. However, concerns were raised regarding Nvidia’s gross margin, which dipped to 75.1% from 78.4% in the previous period. The company’s annual gross margin forecast also fell slightly short of analysts’ estimates, indicating some room for improvement in managing costs and optimizing profitability.
Mark Lushcini, chief investment strategist at Janney Montgomery Scott, downplayed the decline in Nvidia shares, labeling it as a “rounding error” in light of the company’s significant gains throughout the year. While Nvidia’s growth rate may have slowed in recent quarters, its overall trajectory remains positive. Lushcini stated that Nvidia continues to expand rapidly, albeit at a slightly reduced pace. The market sentiment towards Nvidia appears to be cautiously optimistic, with a recognition of the company’s enduring strength and market leadership.
The impact of Nvidia’s second-quarter results on Asian tech and chip stocks underscored the interconnected nature of the global semiconductor industry. While short-term fluctuations may occur in response to specific company performances, the long-term outlook for key players like Nvidia remains promising. Investors and stakeholders will continue to monitor developments in the tech sector, paying close attention to emerging trends and competitive dynamics.
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