Shares of artificial intelligence (AI) chipmaker Nvidia (NVDA +1.04%) have struggled lately. The stock closed at about $213 on Wednesday, down about 6% over the past week and off about 10% from an all-time high of $236.54 earlier this month.
That weakness comes despite a fiscal first-quarter report on May 20 that, by almost any measure, was outstanding. Revenue rose 85% year over year to a record $81.6 billion. Data center revenue climbed 92% to $75.2 billion. And management raised the quarterly dividend from $0.01 per share to $0.25 per share while authorizing an additional $80 billion in share repurchases.
So, what is going on?
Image source: Getty Images.
The quarter itself was exceptional
Nvidia's fiscal first quarter of 2027 (the period ended April 26, 2026) really was something.
The headline 85% revenue growth marked a sharp acceleration from 73% growth in fiscal Q4 -- and the chipmaker's profit trajectory was equally striking. Non-GAAP (adjusted) earnings per share of $1.87 rose 140% year over year, and free cash flow climbed to $49 billion in the quarter alone.
And underpinning this business momentum was relentless data center demand, with hyperscalers accounting for roughly half of data center revenue -- and the rest from a widening mix of AI cloud and enterprise customers, alongside a fast-growing sovereign AI vertical. Data center networking revenue alone nearly tripled year over year to about $15 billion.
Even more, management expects even stronger growth ahead. Nvidia guided to fiscal Q2 revenue of $91 billion, plus or minus 2%. This implies about 95% year-over-year growth.
"Demand has gone parabolic," said Nvidia CEO Jensen Huang during the company's fiscal first-quarter earnings call. "The reason is simple. Agentic AI has arrived. AI can now do productive and valuable work."
So what could investors possibly be worried about?
What may be weighing on shares
For starters, the stock was arguably priced near perfection heading into the report. Going into earnings, shares had climbed about 20% off their February low, hitting an all-time high less than a week before the report.
But there are also a couple of real concerns surfacing in the filings themselves. One has to do with how concentrated Nvidia's customer base has become. The chipmaker's top three customers accounted for about 64% of accounts receivable in the latest quarter -- up from roughly 56% the prior quarter. That kind of concentration could leave Nvidia exposed if even one or two of those buyers were to pull back.
Another has to do with how much capital Nvidia is locking up to meet anticipated demand. The company's inventory and total supply related commitments swelled to about $145 billion as of the end of the quarter. That is a lot of capital tied to forward demand assumptions in an industry that has historically gone through cycles.
And it doesn't help that data center product shipments to mainland China remain essentially on pause. Nvidia recorded no data center compute revenue from China during the quarter, compared to $4.6 billion in the year-ago period.
NASDAQ: NVDA
Key Data Points
Despite these issues, the underlying business appears to be firing on all cylinders. The breadth of demand and the size of the new capital return commitments together suggest management has plenty of confidence in the path ahead. And it is worth remembering that this is now the fourth straight quarter the stock has slipped after a beat-and-raise report -- a pattern that may say more about how much optimism the market keeps trying to price in than about any single quarter's results.
For now, I think investors who already own the stock should remain patient. Shares could keep wobbling as the market digests both the explosive growth and the growing risks. But the underlying business does not appear to be breaking down. It just may need some time to grow into the expectations placed on it.
