Shares of graphics chip maker Nvidia Corp. plunged nearly 7 percent on Friday afternoon, after company comments late Thursday that it could face supply constraints outshined a better-than-expected quarterly report.

In a conference Thursday, Nvidia chief Jen-Hsun Huang said that contract chipmakers it uses are nearly at capacity, which could lead to product limitations in the third quarter.

Shares of the Nvidia fell $3.23, or 7 percent, to $42.90 in Friday trading on the Nasdaq Stock Market.

Santa Clara-based Nvidia (Nasdaq: NVDA) said revenue increased to a record $935.3 million, compared to $687.5 million for second quarter of fiscal 2007, an increase of 36 percent.

''These results reflect the growing importance of the GPU as well as great execution across the company, said Jen-Hsun Huang, president and CEO of Nvidia, in a statement.

Net income was a record $172.7 million, or 43 cents per share, an increase of 99 percent compared to the same quarter a year ago. The results easily breezed past analysts' projections of a profit of 43 cents a share on revenue of $859.8 million.

Its desktop graphics chips lines grew 37 percent year-over-year, and the notebook product line grew 129 percent from last year. The company now owns 65 percent of the total desktop market space, and 68 percent of notebook graphics market.

Marvin Burkett, the company's CFO, said in a conference call that he expects third-quarter revenue to rise 5 percent to 7 percent from the preceding period.

The firm also said late Thursday it has approved a three-for-two split of its common stock. The new shares will be distributed around Sept. 10 to shareholders of record as of Aug. 20.