AI Stocks Decline as Nvidia Q4 Results Spark Margin Concerns

Nvidia Reports Strong Q4 Growth but Warns of Margin Tightening

AI chip giant Nvidia Corp posted a 78% increase in Q4 revenue, but its gross margins are expected to shrink as it rolls out new Blackwell AI chips.

• Q4 Gross Margin: 73.5%
• Q1FY25 Estimated Margin: 71% (vs. analysts’ 72.2% forecast)

Concerns over lower-than-expected margins and potential US tariffs on chipmakers triggered a sell-off in AI-related stocks globally.

Indian AI Stocks Drop on Margin Worries

AI and data center-focused stocks in India reacted negatively to Nvidia’s margin outlook and fears of increased competition from low-cost AI models.

On February 27, the following AI-linked stocks were in the red:

• Anant Raj: Down 5.5% at Rs 481
• Netweb Technologies: Down 4.5% at Rs 1,489
• E2E Networks: Down 4.76% at Rs 1,895
• Black Box: Down 5% at Rs 392.4
• Orient Technologies: Down 3% at Rs 320

Global AI Stock Reaction

The impact wasn’t limited to India—major AI chip suppliers also saw declines:

• Taiwan Semiconductor Manufacturing Co (TSMC): Down 0.47%
• Samsung Electronics: Down 0.18%
• SK Hynix: Down 1%

Why Are AI Stocks Falling?

Several factors are driving negative sentiment:

1. Nvidia's Margin Warning: Lower-than-expected margins indicate higher costs for its next-gen Blackwell AI chips.
2. New AI Model Competition: The launch of low-cost AI models from DeepSeek has raised fears of reduced demand for Nvidia's high-priced AI chips.
3. Microsoft Data Center Concerns: Reports suggest Microsoft is scrapping some data center leases, which could affect cloud and AI infrastructure spending.
4. US Tariffs on Chips: Potential tariffs on AI chipmakers add uncertainty to future earnings.

Long-Term AI Growth Outlook

Despite the short-term dip, AI stocks have performed well recently due to:

• Increased adoption of AI technologies
• Rising demand for data centers and cloud computing
• Power-hungry AI models requiring advanced chips

However, competition from alternative AI models and geopolitical risks may create volatility in the near term.

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