Tech giant and AI-innovator NVIDIA released its earnings on Wednesday 28 August 2024, beating its own forecasts and Wall Street estimates.
However, the company’s stock price dropped by around 3% the next day. To be clear, NVIDIA’s earnings went from $13.5bn to $30bn year over year. That’s about a 122% increase. Yet Wall Street punished NVIDIA – not for the patently insane level of success the company is having, but because the increase wasn’t as eye-poppingly huge as they had hoped.
Wall Street shockers
Wall Street wanted to be shocked at how good NVIDIA’s earnings were. Honestly, it’s hard not to imagine Wall Street as a financial Donner party that decides to eat each other before they run out of rations.
This led to pundit concerns that the “AI Bubble is Bursting” and gloom and doom all around. Signs of rationality have begun returning, especially outside of the Wall Street groupthink. But it does beg the question – how much stock should enterprise buyers put into this increasingly pessimistic news cycle events around AI companies?
The answer is little to none. All enterprise buyers need to know is that AI is a hot topic – therefore the news cycle will blow any reaction to AI that isn’t 100% positive way out of proportion. NVIDIA is no startup and being disappointed in a 122% increase to $30bn is flat-out irrational. NVIDIA’s financial health is fantastic – and honestly for the enterprise buyer that’s all they need to consider when it pertains to the numbers NVIDIA generates.
AI rationality
In addition, AI is in the middle of a bubble, a hype cycle where it is all anyone can talk about. For the enterprise buyer, that means due caution – don’t invest in AI and AI technologies without a good use case – one that saves money/time or makes money. It is rational to look at the AI frenzy and worry that things are moving too quickly, but this happens all the time in technology.
Rational caution and resisting the unhealthy urges created by FOMO (fear of missing out) is the order of the day. Stock prices fluctuate and financial pundits often veer into areas where they have little to no expertise, such as evaluating the potential of new technologies.
Enterprise technology decisions are meant to last multiple years and be executed strategically. Don’t let the tactical outlook of the stock market and financial pundits derail good technology strategy.
“Don’t let Wall Street irrationality drive technology decisions” was originally created and published by Verdict, a GlobalData owned brand.
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