Today we heard Q3 earnings from Nvidia, the most important company in the world.

Is this hyper-growth story still intact?

As we discussed yesterday, coming into this earnings report the stock is no longer cheap, as the rapid earnings growth is no longer outpacing the even more rapid growth in the valuation (now $3.6 trillion).

And we also observed from the Q2 earnings event back in August, that supply constraints seemed to have capped Nvidia’s growth in data center revenues (which is almost the entire business now).

With that, let’s take a look at Q3. 

They beat on revenue and earnings. But after five consecutive triple-digit revenue growth quarters, the year-over-year revenue growth in Q3 was 94% — no longer triple-digits, though still incredible growth, with incredible profitability of $20 billion in net income.  

But the growth rate trajectory from here is down.  As you can see in the graphic above (within the green box), as the size of the key Data Center business has multiplied over the past year, the new revenue added every quarter is fairly stagnant.

That said, the gaming business had some unusual growth (green arrow in the above graphic), though it looks like they may have pulled forward some sales to boost the overall growth for the quarter.  The clue?  The CFO said to expect the gaming revenue next quarter to decline.

So, the growth rate does indeed appear to be capped, at this stage, for Nvidia.  And the CFO acknowledged it today in the prepared commentary and in the conference call, saying that “supply constraints” are keeping them from meeting demand. 

And we can deduce that the issue is manufacturing capacity, given their reliance on Taiwan Semiconductor.

This presents some resistance for the speed of change in the technology revolution, which should start to weigh on Nvidia shares.

With that, and given the likely bumpy path geopolitically over the next couple of months, the Nasdaq looks vulnerable to a correction.