Shares of chip designer Nvidia have fallen as investors were spooked by signs of slowing growth and production problems, despite the artificial intelligence company reporting a 122% increase in second-quarter revenue compared to the same period last year.

The Silicon Valley company’s revenue for the period more than doubled to $30bn (£23bn), beating average analyst estimates of $28.7bn. However, investors were concerned about signs of a slowdown in growth, particularly around its next-generation AI chips, codenamed Blackwell.

The stock fell as much as 7% in pre-market trading before paring its losses to a 3% decline. The chipmaker is the world’s third most valuable company, with a market value of $3.1 trillion.

Nvidia said shipments of its Blackwell chips – which contain 208 billion transistors that perform calculations to train its large language model – would be delayed by several months from January. CEO Jensen Huang has previously said Blackwell would generate “a lot of revenue” for the company this year.

Simon French, chief economist and head of research at investment bank Panmure Liberum, told the BBC: “There were some signs around the edges in the data that the growth rate was trying to slow.

“Their current AI chip ‘hopper’ is selling well, but the next one, the next-generation Blackwell, has faced production delays, and that may be one reason Wall Street has been selling the stock after hours.”

In a call with investors and reporters last night, Nvidia executives did not provide details on the extent of Blackwell’s delivery delay, but said production issues had been addressed by TSMC, the Taiwanese semiconductor company that builds the U.S. company’s most advanced chips. They added that early samples were now being shipped to a small group of customers

Nvidia’s share price drop dragged down U.S. markets, particularly the S&P 500 index. Nvidia makes up about 6% of the index’s total value and has helped boost gains this year, after rising more than 160% in the past 12 months.

Matt Britzman, an analyst at investment platform Hargreaves Lansdown, said Nvidia faced a major challenge in living up to the hype. “It’s less about beating estimates now, markets are expecting them to be shattered and it’s the scale of the outperformance that seems to be disappointing a little bit.”

While many investors believe in the theoretical impact of artificial intelligence, claiming it could transform nearly every global industry, French noted that the practical application cases are “not yet proven.”

“Such high expectations for this stock, not just as a single company, but for its broader economic impact,” he said. “If you want to raise expectations that high, you have to continue to grow at spectacular rates.”

Britzman cautioned against reading too much into the market reaction, however, as investors tended to “overstate” the importance of any one set of quarterly results, particularly the “grand scheme of AI” outlook. Instead, he said companies like Microsoft and Tesla, and Facebook and Instagram owner Meta, were working on a “multi-year, even multi-decade, time frame and investors would be wise to adopt a similar mindset.”

He added: “The issue of return on investment, which many AI bears fall back on, simply isn’t the most important consideration for Nvidia’s largest customers right now. Like many before it, this cycle won’t be a straight line, but as the ‘build it and they will come’ approach continues, it plays Nvidia’s card.”