Asian semiconductor-related stocks saw widespread declines on Thursday, following Nvidia's announcement of a slowing revenue growth forecast. Despite strong earnings for the third quarter, the company's guidance for the current quarter fell short of the lofty expectations that have driven its market dominance during the AI boom.

Nvidia’s Financial Highlights

For the quarter ending October 27, Nvidia's revenue surged by 94% year-over-year to $35.08 billion, exceeding analysts’ expectations of $33.16 billion. Net income also grew by an impressive 109%, reaching $19.3 billion.

However, Nvidia projected current-quarter revenue of $37.5 billion, plus or minus 2%, which implies a growth rate of 70%—a marked slowdown from the 265% annual growth achieved in the same quarter last year. While this still surpassed analysts’ expectations of $37.08 billion, the deceleration in growth concerned investors.

Daniel Newman, CEO of the Futurum Group, commented, “No matter how good the company does, if the guide is anything less than the high end of the whisper, you will probably see some selling pressure.”

Nvidia shares dropped by 2.5% in extended trading to $142.20 apiece following the earnings report, setting the tone for a regional selloff in semiconductor-related stocks.

Ripple Effects Across Asia

The sentiment spilled over to Asia, hitting Nvidia's suppliers and other chip-related stocks:

• Japan: Advantest Corp., a supplier of semiconductor testing equipment and a key Nvidia client, fell 5.6%, marking the largest loss among chip-related stocks on the Nikkei 225. Meanwhile, SoftBank Group, which owns a stake in chip designer Arm, dropped 1.5%.
• Taiwan: Taiwan Semiconductor Manufacturing Company (TSMC), which produces Nvidia’s high-performance GPUs, slipped 1.5%. Hon Hai Precision Industry, globally known as Foxconn and a major assembler of Nvidia’s superchips, fell 1.9%.
• South Korea: SK Hynix, a supplier of high-bandwidth memory (HBM) chips for Nvidia's AI applications, started the day with gains but reversed to trade 2% lower.
• China: Kuaishou Technology and Alibaba Pictures also declined amid broader weakness in the technology sector.

Samsung Electronics Defies the Trend

Amid the regional downturn, Samsung Electronics bucked the trend, rising 0.9%. Reports suggest that Samsung is working toward obtaining certification to supply advanced HBM chips to Nvidia, potentially expanding its role in the AI hardware supply chain.

Slowing Growth in AI

Nvidia has been the primary beneficiary of the ongoing AI boom, with major clients like Microsoft, Alphabet, Amazon, and Meta Platforms ramping up spending on AI infrastructure. Nvidia's dominance in AI chip production has propelled its stock to nearly triple in value this year, making it the world’s most valuable publicly traded company.

However, the forecast for slower growth raised concerns that the AI demand surge might be maturing, prompting a reassessment of valuations in the semiconductor sector. Anwiti Bahuguna, CIO of Global Asset Allocation at Northern Trust, noted, “Growth is slowing down, though from staggering numbers.”

Outlook for Asian Semiconductor Stocks

The selloff in Asian chip stocks underscores the sensitivity of the market to Nvidia’s performance, given its outsized influence in the AI hardware ecosystem. While the long-term demand for AI chips remains robust, investors are increasingly cautious about near-term growth prospects and valuation risks.

Factors to Watch:

• Continued investment in AI infrastructure by major global tech firms.
• The evolution of Nvidia’s supplier relationships, particularly with firms like TSMC, Samsung, and SK Hynix.
• Broader economic and currency trends, including the strength of the U.S. dollar, which has posed headwinds for Asian equities.

Conclusion

The recent slump in Asian semiconductor stocks highlights the high expectations surrounding Nvidia and the AI sector as a whole. While the company’s fundamentals remain strong, slowing revenue growth and cautious investor sentiment have reverberated across global markets. For Nvidia’s suppliers and other chipmakers, the focus will now shift to sustaining long-term growth in an increasingly competitive and dynamic industry.

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