Vertiv and Lumentum Stock Swing to a Loss. The Nvidia Bump Fades.

Vertiv Holdings is among the many data center suppliers profiting from the AI boom. (NYSE)

Key Points

• Nvidia’s third-quarter data center revenue reached $51.2 billion, a 66% increase year-over-year, exceeding estimates.
• Despite initial gains, component suppliers like Corning and Lumentum fell 2.5% and 6.2%, respectively, by Thursday’s close.
• Nvidia’s stock movement significantly impacts other AI spending chain companies, including direct partners like Vertiv.

At first, it looked like Nvidia’s quarterly earnings report would boost shares for the entire data center ecosystem on Thursday. The gains didn’t last.

Suppliers of components such as lasers, cooling systems, and networking equipment matched or even outpaced the chip maker in early trading. Then almost all of them swung to a loss, outpacing the broader market’s decline.

Laser makers Corning and Lumentum Holdings fell 2.5% and 6.2%, respectively. Vertiv Holdings, which makes server racks and cooling products, dropped 3.1%. And networking equipment company Ciena slumped 0.3%. Nvidia itself was down 0.3%. All of those names were up at least 3% earlier in Thursday’s session.

Nvidia’s third-quarter earnings print on Wednesday appeared to ease concerns of a slowdown in artificial-intelligence and data-center spending. The chip maker reported data center revenue of $51.2 billion for the quarter, up 66% from the year before and ahead of Wall Street’s estimate of $49.05 billion, per FactSet. But it didn’t take long for investors to get skittish again.

The S&P 500 and Nasdaq Composite were down 0.7% and 1%, respectively, Thursday afternoon.

For better or worse, Wall Street clearly views Nvidia as a bellwether for companies further down the AI spending chain. After all, hyperscalers can’t put Nvidia’s chips to use without billions of dollars worth of infrastructure to house them.

Some of these companies also have direct relationships with Nvidia. Corning and Lumentum are among the suppliers in Nvidia’s silicon photonics ecosystem, for instance. Vertiv, meanwhile, partners with Nvidia on AI infrastructure projects.

As long as the world’s most valuable company continues to make money, so too will many much smaller companies profiting from AI. But when Nvidia swings to a loss, it can bring dozens of other stocks down with it.

Write to Nate Wolf at nate.wolf@barrons.com