Growth is not in doubt, but reminds of an IT bubble
Korean semiconductor volatility, downward pressure expected to increase
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Nvidia, the leader in artificial intelligence (AI) chips, has announced its third-quarter results, surpassing market expectations. Its revenue exceeded Wall Street’s forecast (according to market research firm LSEG) of $33.16 billion. Furthermore, Nvidia is confident that its fourth-quarter revenue will reach an even higher $37.5 billion. Despite this, the market’s reaction has been lukewarm. Soon after the earnings announcement, Nvidia’s stock price dropped nearly 5% in after-hours trading but slightly recovered due to the “Blackwell shipping plans.” Experts predict increased downward pressure on the domestic stock market as they believe it will be difficult for Nvidia to surpass the heightened expectations.
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“Strong Performance but Weak Stock Response…High Expectations” = Nvidia announced after the close of the New York Stock Exchange on the 20th (local time) that it achieved third-quarter revenue of $35.08 billion (approximately 49.119 trillion won) and earnings per share of $0.81 (1,134 won). These figures exceeded Wall Street’s expectations. However, their fourth-quarter revenue forecast, presented as “37.5 billion ± 2%”, fell short of the market expectation of $37.08 billion. Following the announcement, Nvidia saw a more than 3% drop in its stock price in after-hours trading, despite closing regular trading at $145.89, a 0.76% drop from the previous day.
Suk-hwan Kim, a researcher at Mirae Asset Securities, commented, “Historically, Nvidia’s stock price has risen in after-hours trading when it released earnings that beat market expectations. However, since the second quarter, the anticipation of an ‘earnings surprise’ has diminished.” Investors have become accustomed to Nvidia’s rapid earnings growth, making it challenging to meet heightened expectations with ordinary results.
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“Growth isn’t in doubt, but reminiscent of the IT bubble” = Experts acknowledge Nvidia’s steady growth, yet they warn that the stock’s rapid ascent poses a risk of heightened volatility in response to minor disruptions. While historical examples exist, like the market being driven by a few stocks in the 1960s and 1990s, Nvidia’s dominance in this rally is particularly pronounced. As of the day’s closing, Nvidia’s share price had increased nearly 200% this year alone.
There are also comparisons to the 1990s dot-com bubble. Sang-hyun Park, an iM Securities researcher, noted the similarity in trajectories between the stock prices of Cisco Systems during the IT bubble and Nvidia now. “Given the sharp stock price rise, even small earnings misses could trigger temporary corrections,” he noted. He also commented on the limitations, despite the winner-takes-all nature of technological innovation cycles focused on few companies, for the tech-heavy market to continue its strong rally solely due to ‘Magnificent 7,’ the major tech stocks in the U.S.
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“Korean semiconductor stocks to undergo volatility too” = While the ‘big tech rally’ driven by Nvidia slows down, it will be challenging for the domestic stock market to find upward momentum. Sung-hoon Lee, a researcher at Kiwoom Securities, stated, “The domestic market currently lacks clear direction due to ongoing uncertainties from Trump’s policies and Nvidia’s earnings announcement. A differentiated market trend based on individual sectors and issues persists.” Since Nvidia’s fourth-quarter revenue forecast did not meet market expectations, a rebound would be more challenging.
Jae-man Lee, a researcher at Hana Securities, observed, “SK Hynix has largely benefited from Nvidia, indicating its stock trend might closely follow Nvidia’s.”
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“Expectations for ‘Blackwell’ normalization” = However, there is speculation that the market atmosphere could change if Nvidia’s new AI semiconductor product, ‘Blackwell,’ begins regular shipments. Suk-hwan Kim from Mirae Asset Securities pointed out, “Stock prices always move in anticipation, so exceeding those expectations with news is crucial.” Nvidia responded that the official production and shipment of Blackwell would start in the fourth quarter and expand gradually next year.
Nvidia’s CEO Jensen Huang confidently stated, “Demand for Blackwell will exceed supply for several quarters.” In connection with this, as of 10 am, both Samsung Electronics and SK Hynix started weak in the domestic market but showed an upward trend after the market opened. Young-min Ko, a researcher at Daol Investment & Securities, commented, “Especially SK Hynix is expected to maintain a technological lead over followers in HBM4, and with strong competitiveness in high-capacity eSSDs, it is anticipated to highlight its premium as a leading beneficiary of growing demand for AI-made memory next year.”