LanguageLeap

Nvidia recently reported impressive earnings, showcasing significant growth driven by its central role in the booming AI industry. However, despite exceeding expectations, the company’s stock fell in after-hours trading, reflecting a mix of market hype and investor uncertainty. This lesson delves into Nvidia’s financial performance, the market’s reaction, and the broader context of the “AI gold rush” that has positioned Nvidia as a key player. Ideal for English learners, this lesson includes key vocabulary, comprehension questions, and engaging discussion prompts to deepen your understanding of market dynamics and the evolving tech landscape.

Nvidia reports big earnings, but still falls flat in the eyes of investors

Warm-up question:

Have you heard about Nvidia and its role in the AI industry? Why do you think people are so excited about it, and what could cause that excitement to fade?

Listen: Link to audio [HERE]

Read:

AILSA CHANG, HOST:

Wall Street analysts are calling today their Super Bowl. The chip company Nvidia reported blockbuster earnings this afternoon, but that big win fell flat. Its stock fell in after-hours trading, and here to explain more is NPR finance correspondent Maria Aspan. Hi, Maria.

MARIA ASPAN, BYLINE: Hey, Ailsa.

CHANG: Hey. OK, so Wall Street has been waiting all week for the closing bell for Nvidia to release this report. How did it do, exactly?

ASPAN: Look, it did really well. Nvidia reported sales of $30 billion in just…

CHANG: Wow.

ASPAN: …The last three months.

CHANG: Wow.

ASPAN: That is more than double its revenues from a year earlier, and it’s better than what analysts were expecting. But look, the hype was intense, and, in some ways, Nvidia was just never going to live up to it. There are a few things going on here. First of all, Nvidia has been just such a crazy market success story. There was one point in June when its stock price rose so high that it became the most valuable company in the world, overtaking Microsoft and Apple.

CHANG: Right.

ASPAN: But it’s not a Microsoft or an Apple. Those companies do hundreds of billions of dollars a year in sales, not tens. And if you look at Nvidia sales, it’s still kind of a tiny company in comparison, and that’s where you start to see why this might be a little bit more hype than reality.

CHANG: Right. I mean, Nvidia also is not exactly a household name. It has this weird spelling. The company is still teaching people how to pronounce its name. But just remind us why everyone is paying so much attention to this company.

ASPAN: It is all about the AI gold rush. All of the big tech companies, those household names – Microsoft, Facebook, Amazon, Google – they’re all going after AI, and they’re spending billions of dollars or tens of billions of dollars each to do so. And if AI is the latest gold rush, Nvidia is the one selling companies the picks and the shovels to go get that gold. I have to say, I’m stealing that metaphor from analyst Andy Li at CreditSights. He told me that as long as big companies like the Microsofts and Googles are trying to what he calls hyperscale their AI investments, Nvidia is going to be at the center of the action.

ANDY LI: In some respects, they are really the only game in town, and as long as the appetite from kind of, like, the big hyperscalers – as long as the appetite to invest continues, then, you know, the vast majority of that benefit is going to flow to Nvidia.

ASPAN: And Li also told me that the frenzy around Nvidia isn’t just about its business, as good as that is. It’s also about the stock market overall.

CHANG: Yeah, let’s talk about the stock market overall. Why does Wall Street care so much about Nvidia?

ASPAN: This is a larger story. It’s not just about what is frankly still a B2B equipment maker at its core. I mean, tech is the foundation of the market right now, and Nvidia is the one undergirding these big tech companies. So it would be bad for everyone, not just Nvidia, if the market tanks. And it’s also important to point out, tech has been this bright spot for investors and, frankly, for all of us, amid all of this other uncertainty. You know, we’re waiting for the Fed to lower interest rates. We’re still feeling the effects of inflation. We’re going into a very contentious presidential election. And amid all of that, tech, and especially AI, seems like this huge, happy extravaganza. In other words, it really is kind of like the Super Bowl.

CHANG: Maybe. That is NPR’s Maria Aspan. Thank you so much, Maria.

Vocabulary and Phrases:

1. Blockbuster: Something that is very successful, especially a film, book, or product.
2. Fall flat: To fail to impress or meet expectations.
3. Hype: Intense promotion or publicity, often exaggerated.
4. Gold rush: A period of feverish pursuit of wealth, especially in reference to a new opportunity.
5. Only game in town: The only option available in a particular situation.
6. Frenzy: A state of intense excitement or activity.
7. At its core: The most important or central part of something.
8. Undergirding: Providing support or a strong foundation for something.
9. Tank: To fail completely or to decline suddenly and sharply.
10. Contentious: Likely to cause disagreement or argument.

Comprehension Questions:

1. What recent financial news did Nvidia announce, and how did the market initially react?
2. Why is Nvidia considered the “only game in town” when it comes to the AI industry?
3. What does the term “AI gold rush” refer to in the context of Nvidia and other tech companies?
4. How does the success of Nvidia relate to the overall tech market, according to the discussion?
5. Why might tech, and specifically AI, be considered a bright spot amid current economic uncertainties?

Discussion Questions:

1. Why do you think there is so much hype around AI and companies like Nvidia? Do you think the excitement is justified?
2. Have you ever experienced a situation where something that was highly promoted or a blockbuster ended up falling flat? How did that change your perception?
3. What do you think are the challenges and benefits for a company being the “only game in town” in its industry?
4. Why might investors be worried if a major tech company like Nvidia’s stock were to tank? How could it affect the broader economy?
5. Do you think it’s possible for any industry, like tech right now, to stay a “bright spot” amid other contentious or uncertain times? Why or why not?