Nvidia's Stock Was Down Despite Its Amazing Earnings. Here's What History Says Is Coming Next

It's no secret that Nvidia (NASDAQ: NVDA) is one of the hottest artificial intelligence (AI) stocks in the market. The chip-making juggernaut just reported an incredible Q3, beating Wall Street's sky-high expectations. So why was the stock trading lower on Thursday when the market opened?

Although it might seem to defy logic, it's not an uncommon phenomenon. Let's take a look at why it happens and see if the past might shed some light on what happens next. First, let's take a look at Nvidia's quarter.

Even for Nvidia, this was a strong quarter

Few companies have as much riding on their shoulders as Nvidia does in the current market. The company's performance is seen as a bellwether for the market as a whole. It's a good thing, then, that Nvidia delivered this quarter.

Nvidia's data center segment continues to be the driving force behind its success, though its gaming arm is still showing solid growth. Demand for its Superchips and related hardware is at a fever pitch. As CEO Jensen Huang puts it, "The age of AI is in full steam, propelling a global shift to Nvidia computing."

The big news is the confirmation that Blackwell, the newest iteration of its Superchips, is on schedule and will be rolled out without a hitch. During the earnings call, Huang made clear that the first chips are already "in the hands of all of [Nvidia's] major partners" and will soon be shipped to end users -- companies like Meta and Microsoft operate massive AI data centers.

According to Huang, demand for Blackwell is "staggering"; Nvidia has so many orders it is struggling to keep pace. Despite this, demand for its current Hopper chips remains strong, and Huang indicated he believed orders would continue well into next year.

Nvidia's reach is global

Beyond the numbers, Nvidia highlighted some important developments that show the growing demand beyond U.S. commercial clients. Denmark just launched its first AI supercomputer driven by Nvidia's Hopper chips. This is an important client base for Nvidia that is often overshadowed by its success with big tech cloud operators. "Sovereign AI" -- world governments running their own computers -- could be a massive industry as nations around the world enter an information arms race.

Nvidia is also finding commercial success worldwide, with new private companies in India, Japan, and Indonesia building Nvidia-powered AI data centers.

Nvidia's stock dips

In the initial hours after the market opened on Thursday, shares of Nvidia slipped, briefly reaching $141 after closing at nearly $146 the day before. Why would this happen after such a strong quarter? This is pretty common if Wall Street's expectations exceed the company's performance, even if that performance is solid. That's not what happened here. Nvidia beat estimates handily, delivering revenues of $35.1 billion and earnings per share (EPS) of $0.81. Consensus targets were $33.2 billion and $0.75, respectively.

Here's the thing: market sentiment can exceed even Wall Street estimates. With all the hype around Nvidia and talk of "insane" demand for its new chips, it's becoming increasingly difficult for the company to live up to investors' expectations no matter what numbers it delivers. It's the curse of success. Nvidia has continuously beat estimates, so now, even when it does, it might not be by enough.

Certain research has shown that investors tend to put too much faith in past earnings. Over time, this leads to a stock being overbought in the lead-up to an earnings release and a short-term dip after the release. What Nvidia is experiencing is very normal.

Don't panic. The long-term potential is where we want to place most of our focus here and this report shows it is still firing on all cylinders. Given other stocks that have been in Nvidia's shoes and Nvidia itself last quarter -- shares dipped 18% in the days after earnings -- history tells us that the stock will be just fine.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.