Why Nvidia sold off after strong earnings

Nvidia’s earnings were strong. Revenue hit $96.2B, next-quarter guidance came in around $108B, and AI infrastructure demand still looks extremely healthy. So why did the stock fade after trading near $230? I don’t think the market suddenly turned bearish on Nvidia. I think the question investors are asking has changed. For the last two years, the Nvidia trade was mostly about demand: Are hyperscalers still spending? Is compute still scarce? Can Nvidia sell everything it produces? The answer has repeatedly been yes. Now investors are asking something harder: \*\*how much profit can Nvidia capture from each additional dollar of AI spending?\*\* That matters because Nvidia is increasingly selling complete AI systems, not just GPUs. Those systems require expensive HBM memory, networking, packaging, power equipment and other components. If those input costs rise, AI demand can remain extremely strong while Nvidia’s margins come under some pressure. The macro backdrop also didn’t help. Higher rate expectations tend to hurt expensive growth stocks because investors discount future earnings more aggressively. Marvell’s selloff was another useful signal. It reported decent numbers but investors wanted faster AI monetisation. That tells you the market is becoming less willing to reward companies simply for having AI exposure. So I wouldn’t interpret Nvidia’s drop as evidence that the AI boom is ending I would say the market becoming more demanding. The first phase of the AI trade was about scarce compute. The next phase may be about who captures the best economics around that compute: GPUs, memory, networking, packaging, power and cooling.