AI Sector Collapsed by Nvidia, Is There Still a Chance for Recovery This Year?

2024-09-03, 16:42

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![](https://gimg2.gateimg.com/image/article/17253813611690791857hotspot.jpeg)
## [TL；DR]: 
Nvidia's Q2 revenue and profit both exceeded market expectations, while Q3 revenue was slightly lower than the most optimistic expectations, causing its stock price to rise first and then fall. All three major US stock indices closed down, and the AI sector in the <a href="/price" target="_blank" class="blog_inner_link">crypto market</a> rose first and then fell.

Whenever the market holds optimistic expectations for Nvidia's profitability, the prices of related-AI tokens often rise, forming a synchronous relationship.

The discovery of the value of AI tokens depends on the effective practice of their application prospects, as well as the influence of AI technology stocks, such as NVIDIA and TSMC.

## Introduction
Recently, AI-sector tokens surged due to speculation surrounding Nvidia's (NVDA. US) financial report, but have stalled and fallen after the report was released.

Against the backdrop of overall weakness in the crypto market, the AI sector seems to no longer be as thriving as last year. This article will explore in detail whether there will be new narrative logic in this sector in the future and whether it can usher in a strong recovery.
 
## Financial Report Exceeds Expectations, But Nvidia Still Undermines AI Faith?
As a leading company in the field of AI computing power, Nvidia (NVDA. US) affects the volatility of the US stock market, and has a direct impact on the crypto AI sector. Currently, the market is focused on its financial report released at the end of August.

According to its released Q2 financial report, Nvidia achieved significant growth performance, with Q2 revenue reaching $30 billion, a 122% increase from the same period last year, far exceeding market analysts' original forecast of $28.86 billion. In the key data center business area, revenue reached $26.3 billion, a year-on-year increase of 154%, also exceeding analysts' expectations ($25.08 billion). The company's outlook for the next fiscal quarter is optimistic, with expected third quarter revenue of approximately $32.5 billion, fluctuating between plus and minus 2%. This forecast is also higher than analysts' general expectations ($31.9 billion) and lower than the market's most optimistic expectation of $37.9 billion.
![](https://gimg2.gateimg.com/image/article/17253815421.jpg)
Source: nvidia.com

Specifically, in terms of gaming revenue, Nvidia's performance in the second quarter was equally impressive, achieving $2.9 billion in revenue, a year-on-year increase of 16%, exceeding analysts' expectations ($2.79 billion). In terms of gross profit margin and earnings per share, Nvidia also demonstrated strong financial health, with adjusted gross profit margin increasing to 75.7%, a significant increase from the same period last year (71.2%) and slightly higher than analysts' expectations (75.5%). Adjusted earnings per share were $0.68, a significant year-on-year increase, far exceeding the previous year's $0.27 and better than analysts' forecast of $0.64. The net profit reached an astonishing $16.599 billion, a year-on-year increase of 168%, far exceeding analysts' forecast of $14.64 billion.

To hedge against market disappointment with performance guidance, Nvidia announced a $50 billion stock buyback plan and maintained its quarterly dividend per share unchanged.

But this did not alleviate market concerns about its weakened growth, as Nvidia's stock price first rose and then fell. After the financial report was released, Nvidia's stock price fell by more than 8% in after hours trading.
 ![](https://gimg2.gateimg.com/image/article/17253815722.jpg)
Source: Investing.com 
 
Nvidia's Q2 revenue and profit exceeded market expectations, while Q3 revenue was slightly lower than the most optimistic expectations. Due to factors, such as high market expectations and production cost challenges, its stock price first rose and then fell, it even fell sharply by 8% after the market closed. All three major US stock indices closed down, and such violent fluctuations naturally triggered the AI sector in the crypto market to rise first and then fall.
 
## Is the Narrative of the AI Sector Weak, Relying Solely on Nvidia?
Before the release of Nvidia's financial report, <a href="/price/near-protocol-near" target="_blank" class="blog_inner_link">Near Protocol</a> (NEAR), Artificial Super Alliance (FET), Bittensor (TAO), and <a href="/price/render-rndr" target="_blank" class="blog_inner_link">Render</a> (RENDER) showed impressive price performance. These tokens quickly recovered to their previous highs from the market crash in early August, and the AI sector, which rose as much as 70%, became the only strong sector in a weak market.

Of particular note are the FET and TAO, which have the most impressive price performance. Artificial Super Alliance (FET), as the token of the Artificial Super Intelligence Alliance, integrates artificial intelligence crypto projects such as OCEAN and AGIX, aiming to become the most powerful independent open-source AI research and development organization; Bittensor (TAO) is an open-source blockchain protocol dedicated to building efficient decentralized AI machine learning networks, further promoting the development and distribution of AI computing power.

Although these two projects were not selected for the Nvidia Inception program like Aethir (ATH), ChainGPT (CGPT), and <a href="/price/flux-flux" target="_blank" class="blog_inner_link">Flux</a> (FLUX), they are the segmented leaders in the AI field and have always been important targets of hype.

Undoubtedly, after Nvidia's financial report was released, the AI sector fell across the board, demonstrating the speculative pattern of "buying expectations, selling facts."
 ![](https://gimg2.gateimg.com/image/article/17253815983.jpg)
Source: SoSo Value
 
Looking back at history, Nvidia has always been highly regarded as a benchmark in the field of crypto AI concept tokens. From the end of 2022 until the third quarter of this year, there was a strong correlation between Nvidia and the crypto market.
Whenever the market holds optimistic expectations for Nvidia's profitability, the prices of related AI tokens often rise, forming a synchronous relationship.

This relationship was particularly evident after Nvidia's financial report was released in February this year, when there was a significant hype frenzy in the AI sector of the crypto industry, and the prices of tokens in the sector rose generally. The recent strong performance of AI tokens before Nvidia's financial report once again confirms this pattern.

However, with the brief end of market speculation, Nvidia-related technology stocks have turned from rising to falling, and the overall crypto market has continued its weak trend. It is expected that the AI sector will experience a resonance decline in this context.

It is worth noting that NVIDIA's next earnings conference will be held at November 20, which may usher in another wave of AI token hype.
 
## With Broad Prospects, When Will AI End Its Slump?
The AI sector is one of the most exciting new tracks in this bull market. Up to now, there have been multiple influential AI crypto projects, such as NEAR protocol, <a href="/price/internet-computer-icp" target="_blank" class="blog_inner_link">Internet Computer</a> (ICP), <a href="/price/fetch-ai-fet" target="_blank" class="blog_inner_link">Fetch.AI</a> (FET), Render (RNDR), and Bittensor (TAO). These projects demonstrate the extensive potential of artificial intelligence in the crypto field through unique technological means, such as sharding technology, decentralized computing platforms, intelligent agents, etc.

From the perspective of application scenarios, the application of AI in the field of crypto covers multiple aspects such as computing power integration, smart contracts, data analysis, market forecasting, risk management, and content creation.
For example, Arkham is an AI intelligence analysis platform that covers analysis of various entities, exchanges, funds, whales, and tokens. Users can anonymously buy and sell information about blockchain wallet address owners through smart contracts.
Buyers request intelligence from the community through a bounty, while bounty hunters receive rewards by submitting the requested information.

![](https://gimg2.gateimg.com/image/article/17253816374.jpg)
Source: ARKHAM
 
Such an imaginative new track is susceptible to market hype. From past experience, the discovery of the value of AI tokens depends not only on the effective practice of their application prospects, but also on the influence of AI technology stocks such as Nvidia and TSMC. In fact, Nvidia has always been a typical representative of AI storytelling in traditional finance, with intricate business relationships with numerous AI protocols, and has become a de facto emotional catalyst for this sector.

From a larger perspective, not only have the AI tokens in the crypto market lagged behind this year, but the AI sector in the US stock market has also fallen into a slump. Many well-known AI application layer software companies, such as Adobe (ADBE), Snowflake (SNOW), Unity Software (U), and UiPath (PATH), lack effective innovation in their AI business and are unable to form new revenue growth points. As a result, their performance has fallen short of expectations, making them one of the worst performing sectors.
 ![](https://gimg2.gateimg.com/image/article/17253816585.jpg)
Source: news.futunn.com
 
History has shown that disruptive technologies often evolve from hardware to software and have many twists and turns, and AI is no exception. Short term challenges are inevitable, but technological progress and practical adoption will be unstoppable. Therefore, from this perspective, there is still significant room for development for companies such as NVIDIA and TSMC, while AI computing protocols, such as Render and io.net, will also benefit from it.

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>