Why Nvidia's Stellar Earnings Barely Moved Its Stock

Nvidia crushed Wall Street expectations with 73% revenue growth, but shares rose just 1%. Here's why investors are growing cautious despite the AI boom.

73% revenue growth. 75% data center business surge. Nvidia just delivered another knockout quarter that crushed Wall Street's already sky-high expectations. So why did shares barely budge, rising just 1% in after-hours trading?

The Numbers Were Spectacular

Nvidia's fourth-quarter results were nothing short of extraordinary. The company's data center business now accounts for more than 91% of total sales, cementing its role as the undisputed king of AI infrastructure. First-quarter guidance also beat analyst expectations across the board.

Yet the market's reaction was surprisingly muted. Compare this to previous earnings beats that sent shares soaring double digits, and you'll see a stark difference in investor sentiment.

The Expectation Trap

The problem isn't Nvidia's performance—it's the sky-high bar the company has set for itself. Shares have already outperformed megacap tech peers this year, pricing in much of the good news. Investors now expect not just good results, but miraculous ones.

CEO Jensen Huang told CNBC that "markets got it wrong" about AI's threat to software companies. But ironically, investors seem to be questioning whether Nvidia itself can maintain this torrid growth pace indefinitely.

Winners and Losers Emerge

Interestingly, Nvidia's results sparked different reactions across global markets. Japan's Nikkei 225 surged above 59,000 for the first time, suggesting Asian investors remain bullish on AI beneficiaries.

Meanwhile, Salesforce shares tumbled nearly 4% after its full-year revenue guidance disappointed Wall Street. The divergence highlights how AI is creating clear winners and losers, even within the tech sector.

The Software Disruption Reality Check

Huang's comment about markets "miscalculating" AI's threat to software companies deserves attention. If he's right, traditional software firms face a reckoning as AI tools automate tasks that once required human-built applications.

This shift could explain why investors are rotating from software stocks to pure-play AI infrastructure companies like Nvidia. But it also raises questions about market concentration and whether one company should dominate such a critical technology.

The Power Play Ahead

Next week's White House meeting, where tech executives including those from Amazon, Meta, and OpenAI will pledge to provide their own power for AI data centers, adds another layer to the story. These commitments signal massive infrastructure investments ahead—potentially worth hundreds of billions.

But they also highlight AI's enormous energy demands and the sustainability challenges that could eventually constrain growth.