Introduction: Nvidia shrugs off AI bubble fears
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s one risk event down, one to go, for investors today after Nvidia calmed nerves with some sizzling financial results.
The chipmaker at the heart of the artificial intelligence boom calmed fears of a bursting bubble – and pushed markets higher – by beating Wall Street forecasts, and giving a strong forecasts for its future performance.
Jensen Huang, founder and CEO of Nvida, tried to squish bubble fears, declaring that “We’ve entered the virtuous cycle of AI”
Huang told analysts last night:
“There’s been a lot of talk about an AI bubble.
From our vantage point, we see something very different. As a reminder, Nvidia is unlike any other accelerator. We excel at every phase of AI from pre-training to post-training to inference.”
Sales are up 62% year-over-year, reflecting the massive demand for its chips to power AI systems. The company reported $51.2bn in revenue from data-center sales, beating expectations of $49bn.
And crucially for market sentiment, Nvidia sees faster growth than expected. It is projecting fourth- quarter revenue of around $65bn; analysts had predicted the company would issue guidance of $61bn.
Nvidia’s shares jumped 5% in after-hours trading. Kyle Rodda, senior financial market analyst at capital.com, calls the results “practically spotless”, explaining:
The stock is up after hours and that’s pushed US futures higher, with Asian stock markets likely to follow suit. Something could go wrong as investors parse the details over the course of the day. However, after a torrid few weeks of trade, especially over the last three days, to paraphrase Ice Cube, today could be a good day.
Nvidia’s strong results may calm anxiety that the valuations of companies in the AI revolution have risen dangerously high, leaving the markets vulnerable to a crash. Those worries had heightened after two major investors – SoftBank and Peter Thiel – recently sold their stakes in Nvidia.
Asia-Pacific markets have rallied today (more on that shortly), and European bourses are set to open higher.
Also coming up today
The second fear which hit share prices in recent days is that US central bankers may not cut interest rates as quickly as hoped.
The long-awaited US jobs report for September is finally due to be released today, and should give insight into whether the labour market has continued to cool.
September’s Non-Farm Payrolls report is expected to show a rise of 50,000 jobs with the unemployment rate remaining at 4.3%. A weak reading might nudge the Federal Reserve towards a December rate cut…
The agenda
-
9.30am GMT: ONS data on young people not in education employment or training
-
10a, GMT: Eurozone construction data for September
-
1.30pm GMT: US non-farm payroll report for September
-
3pm: US home sales data for October
Key events
FTSE 100 jumps after Nvidia results
The Nvidia relief rally has reached London.
After falling for the last five sessions, stocks are higher in early trading. The FTSE 100 share index has gained 56 points, or 0.6%, at the start of trading, to 9564 points.
Technology investors are leading the rally, with Polar Capital Technology Trust up 3.45% and Scottish Mortgage Investment Trust gaining 2.3%.
It’s another sign that Nvidia’s earnings have reassured investors.
Michael Brown, senior research strategist at brokerage Pepperstone, says:
NVDA duly delivered a classic ‘beat and raise’ after hours yesterday, not only topping both top-and bottom-line expectations, with EPS at $1.30 and revenues at $57.01bln in Q3, but also hiking Q4 revenue guidance to between $63.7bln and $66.3bln, above the consensus figure of $61.9bln. All of this, on margins well above 70%…I’m running out of superlatives to describe the figures at this stage, to be honest, though the market clearly isn’t, with NVDA popping as much as 5% after hours yesterday.
With the risk of Nvidia earnings now out of the way, and with the market seemingly content to buy back into the AI theme in the aftermath of the report, at least selectively anyway, I’m relatively confident to call an end to the recent slump that we’ve seen across the equity space, especially with spoos [the futures contract for the US S&P 500 share index] reclaiming the 50-day moving average this morning.
JD Sports says profits will be at lower end of expectations
In the City this morning, retailer JD Sports has not matched Nvidia’s cheery outlook.
JD Sports has told investors that profits this year will come in towards the lower end of current market expectations.
The leisurewear firm reports an improved trend in like-for-like sales in North America, resilient sales in Europe, and improved UK organic sales.
But, it also cautions that it is “taking a pragmatic approach” to its outlook for this financial year, due to “incrementally weaker macro and consumer indicators in recent weeks”.
Régis Schultz, CEO of JD Sports Fashion, says:
“We are navigating a year of volatility in external factors with disciplined execution, reflected in a solid Q3. In the near term, as we enter an important trading period, we are mindful of recent weak macro and consumer indicators in our key markets.
These lead us to take a pragmatic approach for our FY26 profit outturn. We remain confident in the overall positive trajectory for our industry and JD Group over the medium term, and this is well reflected in our commitment to enhanced shareholder returns.”
Deutsche Bank: Nvidia results have completely changed the market mood
After several weak trading sessions, Nvidia’s results have changed the mood in the markets, says Jim Reid, market strategist at Deutsche Bank:
He told clients this morning:
In a market baying desperately for information, today’s US payrolls follows rapidly on the back of Nvidia’s earnings last night and the start of the return to business as usual for US data.
It’s fair to say that Nvidia’s results have completely changed the market mood and pushed out any bubble fears for another day. The chipmaker delivered a decent revenue beat ($57.0bn vs $55.2bn estimate) and gave strong revenue guidance for the current quarter ($65bn vs $61.9bn est.).
The company’s CFO suggested that Nvidia could even exceed its recent target of $500bn of revenue for the next few quarters.
Asia-Pacific stocks soar on Nvidia relief
A relief rally has swept across Asian markets today after Nvidia’s market-topping earnings cheered investors.
Nvidia’s CEO Jenson Huang’s upbeat forecasts about the future of the AI also helped to send shares roaring higher in Japan, where the Nikkei index is up 2.6%.
South Korea’s KOSPI index is up 2%, while Taiwan’s TW50 index has jumped by 3.6%.
Ipek Ozkardeskaya, senior analyst at Swissquote, says Nvidia has delivered another set of impressive – and record-breaking – results, adding:
What might have made a difference in the market’s reaction is Huang saying that “we’ve entered the virtuous cycle of AI. The AI ecosystem is scaling fast – with more new foundation model makers, more AI startups, across more industries and in more countries. AI is going everywhere, doing everything, all at once.”
Introduction: Nvidia shrugs off AI bubble fears
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s one risk event down, one to go, for investors today after Nvidia calmed nerves with some sizzling financial results.
The chipmaker at the heart of the artificial intelligence boom calmed fears of a bursting bubble – and pushed markets higher – by beating Wall Street forecasts, and giving a strong forecasts for its future performance.
Jensen Huang, founder and CEO of Nvida, tried to squish bubble fears, declaring that “We’ve entered the virtuous cycle of AI”
Huang told analysts last night:
“There’s been a lot of talk about an AI bubble.
From our vantage point, we see something very different. As a reminder, Nvidia is unlike any other accelerator. We excel at every phase of AI from pre-training to post-training to inference.”
Sales are up 62% year-over-year, reflecting the massive demand for its chips to power AI systems. The company reported $51.2bn in revenue from data-center sales, beating expectations of $49bn.
And crucially for market sentiment, Nvidia sees faster growth than expected. It is projecting fourth- quarter revenue of around $65bn; analysts had predicted the company would issue guidance of $61bn.
Nvidia’s shares jumped 5% in after-hours trading. Kyle Rodda, senior financial market analyst at capital.com, calls the results “practically spotless”, explaining:
The stock is up after hours and that’s pushed US futures higher, with Asian stock markets likely to follow suit. Something could go wrong as investors parse the details over the course of the day. However, after a torrid few weeks of trade, especially over the last three days, to paraphrase Ice Cube, today could be a good day.
Nvidia’s strong results may calm anxiety that the valuations of companies in the AI revolution have risen dangerously high, leaving the markets vulnerable to a crash. Those worries had heightened after two major investors – SoftBank and Peter Thiel – recently sold their stakes in Nvidia.
Asia-Pacific markets have rallied today (more on that shortly), and European bourses are set to open higher.
Also coming up today
The second fear which hit share prices in recent days is that US central bankers may not cut interest rates as quickly as hoped.
The long-awaited US jobs report for September is finally due to be released today, and should give insight into whether the labour market has continued to cool.
September’s Non-Farm Payrolls report is expected to show a rise of 50,000 jobs with the unemployment rate remaining at 4.3%. A weak reading might nudge the Federal Reserve towards a December rate cut…
The agenda
-
9.30am GMT: ONS data on young people not in education employment or training
-
10a, GMT: Eurozone construction data for September
-
1.30pm GMT: US non-farm payroll report for September
-
3pm: US home sales data for October
