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Sometimes your best just isn’t good enough. That’s the lesson Nvidia ( NVDA ) learned Wednesday after the company’s stock price fell 3% despite posting better-than-expected second quarter earnings and guidance for the third quarter.

It’s not as though the company’s growth was unimpressive, either. Revenue jumped 122% year over year to $30 billion, up from $13.5 billion. Nvidia’s all-important data center revenue topped out at $26.3 billion, a 154% year-over-year increase.

But that wasn’t the kind of blowout that investors have quickly grown accustomed to over the last few quarters.

Beyond investor sentiment, Wall Street analysts have also seemingly caught on to Nvidia’s growth after several quarters of big surprises to the upside.

Nvidia’s revenue reported Wednesday beat Wall Street expectations by 4.1%, the slimmest margin since the fourth quarter of its 2023 fiscal year.

As Nvidia’s business has boomed over the last two years, the company’s revenue topped Wall Street forecasts by double-digit percentage points for three straight quarters, including a 22% difference in its fiscal second quarter of 2024.

And as Wall Street appears to have gotten a better feel for Nvidia’s growth at this point in the AI investment cycle, questions have also arisen about the status of Nvidia’s next-generation Blackwell chip.

Ahead of the company’s earnings announcement, the Information reported that the chip, the follow-up to Nvidia’s Hopper line, faced delays that could impact some of the company’s biggest customers including Microsoft and Google.

In her quarterly comments, Nvidia CFO Colette Kress explained that the company made changes to Blackwell to improve its production yield. CEO Jensen Huang, meanwhile, said that the chip is currently being sampled to customers, a major step toward shipping the processor at volume.

Huang said the company expects to ship several billion dollars of Blackwell revenue in the fourth quarter. But the CEO couldn’t pin down exactly how much revenue Blackwell would generate, despite analysts’ questions.

Huang, however, did provide a number of other strong points for Nvidia, including pointing out that demand for Blackwell platforms is well above supply. The CEO also said that Nvidia’s Hopper platform will continue to grow in the second half of the year, and explained that the company expects its data center business to grow “quite significantly next year.”

Huang also said that AI inferencing is driving the company’s data center revenue. Inferencing refers to computers running AI programs and providing users with answers to their queries.

That should put to rest fears of threats to Nvidia’s long-term growth as companies pivot from training AI models to using inference. Huang appears to believe that Nvidia will continue to plow forward as customers use its chips to both train and run their AI models.

Nvidia is still the world leader in AI chips, and it’ll be some time before rivals AMD ( AMD ) and Intel ( INTC ) catch up to its hardware and software lead. And while Nvidia may be facing a near-term decline in its stock price, Wall Street is still on board.

In an investor note released following Nvidia’s earnings, BofA’s Vivek Arya raised his price target on the chip designer to $165 from $150 per share, writing, “Despite the quarterly noise, we continue to believe in [Nvidia’s] unique growth opportunity, execution and dominant 80%+ share as generative AI deployments are still in their first 1-1.5 [years] of what is at least a 3 to 4-year upfront investment cycle.”

Raymond James’s Srini Pajjuri also raised the firm’s price target on Nvidia’s stock from $120 to $140, writing in an investor note that “Blackwell delays appear better than feared and management is forecasting a strong ramp in FQ4.”

Pajjuri also said demand for Nvidia’s current-generation Hopper chip continues to be healthy and pointed to anticipated sales growth in Q4, despite Blackwell production ramping up at the same time.

Morgan Stanley's Joseph Moore, who raised his price target for Nvidia from $144 to $150, called out Nvidia's sky-high expectations with regards to the company's stock moves after the earnings report.

"Expectations become more challenging as the superlative becomes mundane, but this was still a very strong quarter given the transitional nature of the current environment."

Whether that’s enough to satisfy investors next quarter remains to be seen.

@DanielHowley .

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