Nvidia Posts Record $120 Billion Profit, but Stock Selloff Shaves $259 Billion Off Market Value

Nvidia Corp. posted one of the most profitable years in corporate history on the strength of an unprecedented boom in artificial-intelligence hardware. Within 24 hours, investors erased more than a quarter-trillion dollars from its market value and pulled major U.S. stock indexes lower.

Record results, followed by a sharp drop

The chip designer on Wednesday reported record results for its fourth quarter and fiscal year ended Jan. 25, 2026, fueled by soaring demand for its data-center processors that power generative AI systems. Yet its shares fell 5.5% on Thursday and another 3.2% on Friday, a slide that underscored the tension between Nvidia’s current performance and mounting questions about how long the AI spending surge can last.

Nvidia’s revenue for the quarter reached $68.1 billion, up 73% from a year earlier and 20% from the prior quarter. For the full fiscal year, revenue climbed 65% to $215.9 billion. Net income for the year jumped 65% to $120.1 billion, with diluted earnings per share rising to $4.90 from $2.94.

Almost all of that growth came from the company’s data-center business, now the backbone of its operations. Data-center revenue in the fourth quarter rose to $62.3 billion, up 75% from a year ago and accounting for roughly 91% of Nvidia’s total sales. For the year, data-center revenue grew 68% to $193.7 billion.

“Computing demand is growing exponentially — the agentic AI inflection point has arrived,” Chief Executive Jensen Huang said in a statement accompanying the results.

The company’s traditional gaming segment, once its defining business, has been eclipsed. Gaming revenue totaled $3.7 billion in the quarter, up 47% from a year earlier but down from the prior period as holiday demand faded. For the year, gaming sales reached $16 billion, a little more than a tenth of Nvidia’s total.

Market reaction: profit-taking and a test of expectations

Despite those numbers, the market’s reaction was swift and negative. Nvidia’s stock, which closed at $195.56 before the earnings release, fell to $184.89 on Thursday and about $178.94 on Friday. The initial drop wiped out roughly $259 billion in market capitalization, one of the largest single-day losses ever recorded for a U.S. company by dollar value.

The decline came even though Nvidia beat Wall Street estimates on revenue and earnings and issued guidance above expectations. The company projected revenue of about $78 billion (plus or minus 2%) for the first quarter of fiscal 2027, implying year-over-year growth in the high-70% range. It forecast a GAAP gross margin of 74.9% for the period.

Options markets had priced in a move of around 5.6% in either direction on the day after earnings, indicating traders anticipated volatility but not necessarily disappointment in the results. The subsequent slide suggested investors used the event to take profits after a sharp run-up in the shares and to reassess the sustainability of the AI spending wave.

Why Nvidia now moves the major indexes

Those questions now have outsize consequences for broader markets. Nvidia has grown into the single largest component of the S&P 500 by weight, representing an estimated 7% to 8% of the index. It is also the top holding in the Nasdaq-100, making up roughly 9% of major exchange-traded funds tracking that benchmark, and holds double-digit weightings in prominent technology and semiconductor funds.

When Nvidia dropped 5.5% on Thursday, the S&P 500 fell about 0.5% and the Nasdaq Composite declined 1.2%, even as many other large-cap stocks were little changed. Sector funds heavily concentrated in Nvidia, including popular semiconductor ETFs, lost more than 1.5% over two days as the selloff rippled through chipmakers such as Advanced Micro Devices Inc. and Intel Corp.

For millions of investors in index funds and retirement accounts, that means Nvidia’s quarterly results now function as a kind of macroeconomic event. A single earnings report can swing the value of diversified portfolios because of the company’s size and the way modern indexes are constructed.

AI spending boom—and emerging constraints

Behind Nvidia’s growth is an extraordinary wave of capital spending by a handful of technology giants racing to build the infrastructure for generative AI. Industry estimates for 2026 suggest that Amazon.com Inc., Alphabet Inc., Meta Platforms Inc., Microsoft Corp. and Oracle Corp. are together planning between $660 billion and $690 billion in capital expenditures, much of it on data centers and AI chips.

Nvidia has been a primary beneficiary of that outlay. Its latest generation of processors, including the Blackwell and Grace Blackwell platforms, are used to train and run large language models at companies such as Microsoft’s Azure cloud unit, Amazon Web Services, Google Cloud, Meta and leading AI startups. On the earnings call, Huang called Grace Blackwell with Nvidia’s NVLink technology “the king of inference” and said it can deliver “an order-of-magnitude lower cost per token” for running AI models.

At the same time, large customers are moving to diversify their chip suppliers and reduce their dependence on Nvidia. Meta recently announced a multi-year AI chip agreement with AMD valued at an estimated $60 billion to $100 billion and signaled it may take up to a 10% equity stake in the rival chipmaker. Amazon, Google and Microsoft have all stepped up efforts to deploy their own custom accelerators alongside Nvidia hardware.

Nvidia’s own filings outline other sources of uncertainty. In its annual report to the Securities and Exchange Commission, the company said that a series of U.S. export controls over the past three years has sharply limited its ability to sell advanced AI chips into China and certain other markets. The company said that under current rules it is “unable to create and deliver a competitive product for China’s data center market” and described itself as “effectively foreclosed” from that business.

Nvidia recorded a $4.5 billion charge in fiscal 2026 related to excess inventory and obligations for its H20 data-center chips after updated U.S. export restrictions undermined demand. The company warned that further changes in export or AI-related regulations, including potential rules under new federal legislation, could have a “material adverse impact” on its operations.

Cash generation remains a standout

Even with those headwinds, Nvidia is generating cash at a pace matched by few companies. It produced $102.7 billion in cash from operations in fiscal 2026 and ended the year with $62.6 billion in cash, cash equivalents and marketable securities.

The company said it returned $41.1 billion to shareholders over the fiscal year through share repurchases and dividends, including buying back 282 million shares for $40.4 billion. Nvidia’s board in August approved an additional $60 billion in repurchase authorization, of which $58.5 billion remained at year-end.

The company’s balance sheet carries relatively modest debt—about $9.5 billion in total short- and long-term obligations—leaving it with a strongly positive net cash position.

The bigger debate: durable demand or peak spending?

Huang has argued that AI is not a passing fad but a structural shift in computing that will justify continued heavy investment. He told analysts that customers are already monetizing AI services and that adoption in enterprises is accelerating, particularly as AI systems move from assisting with tasks to acting as semi-autonomous “agents.”

Skeptical investors and some analysts are focused instead on whether a still-young technology can support the trillions of dollars in cumulative capital spending implied by current trends. They point to early signs of pricing pressure in cloud AI services, the uncertain profitability of many consumer-facing AI applications, and the possibility that corporate customers may slow spending if economic conditions worsen.

Those debates are likely to intensify as Nvidia’s influence on markets grows. With data-center chips now accounting for nearly all its revenue, export policy and hyperscaler budgets looming over its forecasts, and its stock now a major driver of benchmark performance, the company sits at the junction of technology, finance and geopolitics.

For now, Nvidia’s results show an AI economy that is very real in at least one corner of the market: the supplier of its core hardware. Whether the rest of the ecosystem can generate enough durable revenue and profit to match that pace will help determine not only Nvidia’s future, but the path of the stock indexes that increasingly rise and fall with it.