Tech stocks in Asia fall after Nvidia’s second-quarter results

Shares of tech and chip-related companies across Asia experienced declines on Thursday, following Nvidia’s release of its second-quarter financial results.

The fall was notably sharp among firms with direct ties to the US semiconductor giant.

South Korean chipmakers see notable losses

South Korean semiconductor companies SK Hynix and Samsung Electronics were among the hardest hit.

SK Hynix, a major supplier of high bandwidth memory (HBM) chips used in Nvidia’s AI applications, saw its shares drop by as much as 6.74%. Samsung Electronics, the largest stock on South Korea’s Kospi index, fell by 3.8%.

While Samsung’s exact role in Nvidia’s supply chain is not fully detailed, it is believed to produce HBM chips for some of Nvidia’s products, as reported by Reuters.

Taiwanese and Japanese firms also affected

Taiwanese firms like Taiwan Semiconductor Manufacturing Company (TSMC) and Hon Hai Precision Industry (Foxconn) experienced declines of up to 2.8% and 2.96%, respectively.

In Japan, semiconductor stocks such as Renesas, Advantest, and Tokyo Electron saw drops of 3.2%, 3.6%, and 3.49%, respectively.

Chinese chipmakers listed in Hong Kong also faced losses despite their limited connection to Nvidia’s supply chain. SMIC, partially state-owned, fell by about 1.4%, while Hua Hong Semiconductor declined by 1.66%.

Nvidia’s results stir market concerns

Nvidia reported stronger-than-expected revenue and earnings per share for the second quarter. However, the company’s stock fell, potentially due to concerns over its ability to sustain explosive growth.

Luke Rahbari, CEO of Equity Armor Investments, commented on CNBC’s “Squawk Box Asia” that while Nvidia’s results were impressive, there were fears that the company’s rapid growth might be slowing down.

Rahbari remains optimistic about Nvidia’s market dominance but acknowledges that the company’s growth trajectory may be facing challenges.

Nvidia’s gross margin declined to 75.1% from 78.4% in the previous quarter, and its forecast for an annual gross margin in the mid-70% range fell short of analysts’ expectations of 76.4%, according to StreetAccount.

Market analysts weigh in on Nvidia’s performance

Mark Lushcini, chief investment strategist at Janney Montgomery Scott, described the drop in Nvidia’s shares as a “rounding error,” considering the significant rise in the company’s stock price this year.

Nvidia’s shares have increased by approximately 150% year-to-date. Lushcini noted that while Nvidia is growing rapidly, the pace of growth has been slowing for four consecutive quarters.

This slowdown, coupled with Nvidia’s high valuation trading at 40-50 times forward earnings, presents a substantial challenge in meeting high market expectations.