Nvidia’s latest results underscore a turning point for markets: the AI leader is moving from hyper growth to high growth, says Nigel Green, CEO of deVere Group.
The company reported second-quarter earnings that beat expectations, with adjusted EPS of $1.04 on revenue of $46,7-billion. Its data center sales, which form the majority of its business, rose 56% to $41,1-billion.
However, they fell just short of forecasts, margins contracted from 78% to 72%, and revenue growth is projected to cool to 52%.
Green says: “The shift is that the company’s moved from hyper growth to high growth.
“This matters because markets have priced Nvidia as if its rate of expansion could continue indefinitely, and that level of outperformance was never sustainable.”
Shares slid in after-hours trading as investors digested the signs of cooling.
Despite the upbeat guidance of $54-billion for the current quarter, markets are focusing on concentration risks and competition. Reports suggest two customers – believed to be Microsoft and Meta – account for around 30% of total revenue.
“The concentration of earnings is too high,” explains Green.
“When almost a third of revenue depends on just two of Nvidia’s clients, the vulnerability is obvious. If either rein in spending, the shockwaves would hit immediately. Markets don’t like that level of exposure.”
Competition is also increasing rapidly. AMD and Intel are scaling new products, while hyperscalers are pushing their own in-house chips.
At the same time, US restrictions on H20 sales to China are limiting Nvidia’s access to a market its CEO estimates is worth $50-billion. Beijing, meanwhile, is actively supporting local chipmakers.
“Nvidia has been the undisputed champion of the AI boom, but margins are already eroding as rivals push into the space,” Green notes.
“Growth in AI demand is relentless, but Nvidia’s share of that growth is being squeezed. The story is no longer about one company dominating; it’s about an entire industry expanding at pace.”
Nvidia’s results highlight a paradox for investors: the company remains central to the AI revolution, but its outsized role in driving equity indices has created fragility.
Tech now makes up nearly 30% of the S&P 500, with Nvidia, Apple, and Microsoft together representing over 15%. Nvidia alone was responsible for more than a quarter of the index’s gains in 2024.
“Nvidia’s importance to the S&P 500 is extraordinary, but that concentration is dangerous,” says Green.
“Markets can’t rely on one stock to deliver so much of the growth story. The risks are growing as its dominance fades.”
The broader AI investment case, however, remains intact. The demand for chips, data infrastructure, software, and electricity to power AI models continues to accelerate, with global data center energy use set to more than double by 2030.
“This is a structural shift in the economy. Spending is real, productivity gains are significant, and applications are multiplying. But investors must adapt.
“Hyper growth has become high growth for Nvidia, and the winners of tomorrow will be spread across the ecosystem, not concentrated in a single name.”