Nvidia Stock Drops 8.5% Despite Strong Q4 Earnings and AI Outlook

Nvidia (NASDAQ: NVDA) shares tumbled 8.5% Thursday, closing at $120.15, despite reporting better-than-expected Q4 earnings and revenue guidance. The drop, Nvidia’s largest since January, was driven by profit-taking and concerns over near-term margin declines as the company ramps up its next-generation AI Blackwell chips.

For the quarter ending Jan. 26, Nvidia posted adjusted earnings of $0.89 per share on $39.3 billion in revenue, surpassing analyst expectations of $0.84 EPS and $38.16 billion in revenue. Its data center unit, the largest revenue driver, generated $35.6 billion, beating forecasts of $34.1 billion. Nvidia’s fiscal Q1 2026 revenue outlook of $43 billion also exceeded the $42.05 billion estimate, though gross margins are projected to drop to 70.6% from 75% in FY2025.

CEO Jensen Huang highlighted strong demand for post-training AI, requiring greater computing power. Nvidia has rapidly scaled Blackwell AI supercomputers, securing billions in sales in the first quarter. However, competition from Chinese AI firms like DeepSeek has raised concerns, as their cost-efficient AI models threaten Nvidia’s dominance.

CFO Colette Kress noted that gross margins would remain in the low-70s during Blackwell’s production ramp but could recover to mid-70s later in 2025. Analysts largely remain bullish, with BofA Securities raising its price target to $200, citing Nvidia’s leadership in AI, robotics, and agentic applications. However, Summit Insights downgraded the stock, warning that lower computing power needs for inference could impact long-term growth.

Despite short-term volatility, Nvidia’s AI momentum and Blackwell’s adoption keep it a key player in the AI-driven future.