Fabrinet Just Lost Billions in Market Value Due to Nvidia. Here’s Why the Reaction Is Overdone.

Fabrinet (FN) just delivered one of its strongest quarters ever, yet the market still punished shares. FN stock dropped almost 20% in a single trading session on Aug. 18 despite results that beat on almost every line.

Revenue rose 45% from a year ago to a record $1.32 billion in the fiscal fourth quarter, coming in ahead of estimates. Non-GAAP EPS of $4.10 also beat the $3.81 analysts expected. The company guided the next quarter well above forecasts as well.

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On paper, it was a blowout. But one of the weaknesses that spooked investors was datacom revenue, which slipped 1% from the prior quarter. The reason this marginal dip mattered so much to the market is that the company recorded lower sales to Nvidia (NVDA), one of its largest customers. For a stock priced for AI-driven growth, any hint of a slowdown related to Nvidia was enough to trigger heavy selling, even when everything else looked good.

When you look at Fabrinet's performance in the fiscal fourth quarter, the panic seems hard to justify. Fabrinet's overall data-center revenue, which includes datacom, actually rose 13% sequentially and jumped 68% from a year ago. The segment now makes up more than half of Fabrinet's total sales. Management called the datacom dip a matter of timing and program transitions, not weaker demand. It also guided the data-center business to grow again next quarter. CFO Csaba Sverha said that the demand environment remains "robust and accelerating."