NVIDIA's nine consecutive quarters of beating expectations are losing their luster, while tech giants face mounting pressure to transform AI promises into tangible results. Supply chain constraints, infrastructure bottlenecks, and signs of slowing growth are testing investor confidence in the artificial intelligence boom.
NVIDIA's latest quarterly results, while still exceeding analyst expectations, represent the smallest margin of outperformance in nine quarters since the AI boom propelled the company to unprecedented heights. The company's stock declined approximately 6% following the earnings announcement. Meanwhile, Apple and Oracle will be in the spotlight today, with investors eagerly seeking substantial returns on AI investments.
NVIDIA's annual revenue growth rate slowed to 56% in the latest quarter, marking the slowest pace in over two years. Supply chain limitations and inadequate power infrastructure are becoming structural factors constraining further explosive growth. If analyst predictions prove accurate, growth will decelerate further in the current quarter.
Additionally, Apple faces greater pressure to demonstrate progress in its AI strategy at today's product launch event. The company's market capitalization has increased by $430 billion since late July, but investors question whether its relatively lagging position in AI can support such elevated valuations.
**NVIDIA's Growth Trajectory Returns to Reality**
The kind of "stunning" quarterly performance that shocked the world two years ago is unlikely to recur soon for NVIDIA. In May 2022, the company issued guidance predicting quarterly revenue of $11 billion, 53% above analyst expectations, subsequently triggering a series of sales and profit surges.
Latest quarterly data shows markedly slower growth. While sales still exceeded analyst expectations, this represents the narrowest margin of outperformance in nine quarters since the AI boom began.
Looking deeper, the law of large numbers partially explains this phenomenon—the larger the scale, the more difficult it becomes to maintain equally rapid growth.
More importantly, structural reasons include supply chain constraints. UBS analysts noted that NVIDIA's latest quarterly "supply" metric (the sum of inventory and supply commitments) rose from approximately $41 billion last quarter to about $45 billion. Analysts stated this data "tells us supply appears sufficient to support continued reasonable revenue growth, but does not signal a significant 'hockey stick' revenue surge."
**Dual Challenges of Supply Chain and Infrastructure**
NVIDIA's AI chips are almost entirely manufactured by TSMC, then packaged into complex configurations and integrated into increasingly sophisticated computing systems. CEO Jensen Huang stated in March that the company's largest AI computing systems contain approximately 600,000 components, with future systems expected to include 2.5 million parts.
At the company's June meeting, Huang indicated that supply for NVIDIA's current systems is "not particularly difficult to obtain" as long as demand can be forecasted to suppliers, though challenges remain. He said: "Supply is constrained, but we're still growing quite rapidly." From the start of NVIDIA chip manufacturing to AI supercomputer delivery to customers currently requires approximately one year.
Even if NVIDIA resolves supply chain issues, another structural challenge is emerging: global power grid growth is insufficient to meet AI computing demands. U.S. utility companies are reluctant to develop energy infrastructure for large AI projects because they lack confidence that the AI boom will last long enough for them to recoup massive investments.
**Tech Giants Under Pressure to Monetize AI**
Apple holds its most important annual product launch today, expected to unveil the iPhone 17 series along with upgraded Apple Watch and Vision Pro headsets. However, investors are truly focused on signs of progress in Apple's AI feature deployment.
Clayton Allison from Prime Capital Financial stated:
"It's difficult to recommend establishing or increasing positions before this launch event, especially after this rally, because we don't expect to see truly exciting features that would drive purchases. If Apple continues to stumble with AI, I'm concerned about stock performance."
David Katz from Matrix Asset Advisors believes the biggest risks have been mitigated, but there won't be another rally until we have a clearer AI roadmap. "I think the stock will go higher long-term, but there won't be much upside in the near term."
Unlike Apple, Oracle is on a different path. After years of slow revenue growth, the company is benefiting from the AI computing race. The stock has still gained over 40% this year, ranking among the top 30 performers in the S&P 500.
Revenue growth is driven by its cloud infrastructure business, with Oracle expecting current fiscal year sales growth to jump to over 70%. Paul Meeks, Managing Director at Freedom Capital Markets, stated: "In this earnings report, I'm primarily focused on whether cloud growth can be sustained. Oracle has already proven its cloud business is benefiting from AI, but now needs to confirm this again."