Nvidia earnings provide little boost for tech stocks

Nvidia earnings provide little boost for tech stocks

AI Investment Remains Strong Despite Market Jitters

Nvidia’s latest quarterly outlook indicates continued strong demand from major technology companies, including Microsoft, Amazon, Meta Platforms, and Alphabet, as they expand their AI infrastructure. However, concerns over excessive spending in the booming AI industry persist.

Market Reaction to Nvidia’s Earnings

Nvidia’s stock declined 0.18% in Frankfurt on Thursday after falling 1.5% in extended New York trading, despite the company forecasting higher-than-expected quarterly revenue. The shares of its major customers remained mostly unchanged.

The so-called “Magnificent Seven” stocks, which have driven significant market gains since the debut of ChatGPT in November 2022, have recently struggled. Investor caution has grown, particularly following China’s DeepSeek announcement of cost-efficient AI performance.

Revenue Growth and Margin Pressure

Nvidia reported a 78% increase in quarterly revenue but projected a first-quarter margin decline to 71% from 73.5%, below analysts’ expectations of 72.2%. The decline is attributed to ramped-up production of its new Blackwell AI chips.

Jacob Bourne, an analyst at eMarketer, noted that despite concerns over DeepSeek’s efficiency and early Blackwell deployment challenges, Nvidia remains a leader in the AI space. However, competition continues to intensify.

Lackluster Response from Asian Tech Stocks

Following Nvidia’s earnings report, Asian technology stocks showed a mixed response. Taiwan Semiconductor Manufacturing Co (TSMC), Nvidia’s primary chip supplier, declined 0.47%, while South Korea’s Samsung Electronics and SK Hynix dropped 0.18% and 1%, respectively. Tokyo’s Nikkei technology sub-index rose 0.2%.

According to IG market strategist Yeap Jun Rong, Nvidia’s earnings report contained fewer surprises than expected, keeping market sentiment relatively calm.

Concerns Over AI Spending and Stock Market Declines

DeepSeek’s low-cost AI models have raised concerns about reduced spending on Nvidia’s high-end AI chips. This contributed to a record single-day loss of over half a trillion dollars in Nvidia’s market value.

Additionally, reports suggesting Microsoft is cutting back on data center leases have fueled worries about slowing AI investment.

The Magnificent Seven stocks have retreated from their late-2024 highs, with the Roundhill Magnificent Seven ETF down over 11% from its December 17 peak.

Nvidia’s Long-Term Position in AI

While Nvidia has consistently exceeded analyst expectations, its revenue growth rate has slowed due to tough comparisons with the previous year’s strong performance. Despite short-term setbacks, analysts suggest Nvidia remains well-positioned due to its early lead and the continued infrastructure investments by tech giants.

Between the launch of ChatGPT in November 2022 and mid-December 2024, the Magnificent Seven stocks gained approximately $11 trillion in market value, with Nvidia alone contributing $2.7 trillion. Nvidia is now the world’s second-most valuable company, worth $3.2 trillion.

Over the past five years, Nvidia’s stock has surged about 1,800%, while the Magnificent Seven stocks have more than tripled on average. By comparison, the S&P 500 has gained roughly 65% in the same period.

“Nvidia earnings provide little boost for tech stocks” “Nvidia earnings provide little boost for tech stocks” “Nvidia earnings provide little boost for tech stocks” “Nvidia earnings provide little boost for tech stocks”