CNBC Daily Open: Could Nvidia’s greatest obstacle be itself?

Nvidia beats expectations, but shares slip
Nvidia third-quarter earnings beat expectations, but shares dropped 2.5% in extended trading. The company's revenue surged 94% year on year to $35.08 billion in the quarter ended Oct. 27. Net income rocketed 109% from a year ago to $19.3 billion. Sales of Nvidia's next-generation chip Blackwell will be limited by supply, not demand, said the company.

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U.S. markets traded mixed on Wednesday ahead of Nvidia's earnings after the bell. The S&P 500 was flat, the Dow Jones Industrial Average rose 0.32% to break its four-day losing streak and the Nasdaq Composite slipped 0.11%. Asia-Pacific stocks were mostly down on Thursday. A drop in Asian chip stocks, following Nvidia's earnings report, weighed down South Korea, Japan and Taiwan markets.

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China's stimulus measures, India's economic growth slowing down and Southeast Asian countries ramping up investment will change the landscape of Asian markets next year, according to HSBC. For 2025, the bank picks three "underappreciated" but "quality stocks," with one having a potential 63% upside.

There's a concept in psychology called the "hedonic treadmill."  It theorizes that as people achieve success, their expectations rise alongside. As a result, people need an ever-increasing magnitude of improvement to feel the same degree of happiness they felt initially.

Nvidia seems a victim of this concept. The chipmaker didn't disappoint in terms of third-quarter revenue and net income, compared with what analysts polled by LSEG had expected.

For the current quarter, analysts forecast $37.08 billion in current quarter sales. The chipmaker predicts it will beat that by around $400 million.

Despite that, Nvidia shares dropped around 2.5% in extended trading.

Investors are likely zooming in on the rate at which Nvidia is growing its numbers, compared with its past performance, not just whether it's surpassing expectations.

Even though Nvidia's third-quarter revenue soared 94% on an annual basis, it's a slower pace than Nvidia's growth in the previous three quarters, when sales rose 122%, 262%, and 265%, respectively, as CNBC's Kif Leswing notes.

The same goes for Nvidia's forward guidance: A growth of around 70% for current-quarter sales, compared with a year earlier. Take out the champagne? No. Investors think that warrants only some lukewarm beer, because it's lower than third-quarter growth of 94%, and dramatically falls short of Nvidia's 265% annual growth in the same period a year prior.

The fact that Nvidia's shares slipped in extended trading after such a sterling report "tells you how much the expectations game on Nvidia has been ramped up," Aswath Damodaran, finance professor at New York University's Stern School of Business, told CNBC.

"They don't just have to beat analyst estimates; they got to beat them by 10%."

It appears that investors have enjoyed Nvidia's astounding performance for so long they've become desensitized to it. Maybe it's time to get off the treadmill?

— CNBC's Kif Leswing, Samantha Subin and Brian Evans contributed to this report.