The bar was already set incredibly high for Nvidia going into this week’s earnings call, as it has been for many quarters now. And once again, the chip giant defies concerns to the AI trade with a strong triple beat so to speak. All three of revenue, earnings, and guidance hit their market and then some. And that is keeping optimism on the AI trade in general, although the early market reaction has been more mixed.
Nvidia shares rose over 3% in after-hours trading before settling down a fair bit. And US futures in general are also following suit to keep more muted on the day. S&P 500 futures are down 0.1% with Nasdaq futures down 0.3% currently. So, what gives?
The early market reaction hints that with the bar already set so high for Nvidia, clearing that is “expected” and fits within the norm these days. While Nvidia still has to do a lot of heavy lifting in keeping market sentiment up, they are often times viewed as the poster boy for the AI rally. As such, “perfection” can be seen as the bare minimum in some sense.
However, adding to the more reserved market response so far today is continued geopolitical and trade uncertainty. The US-Iran conflict remains in focus and could yet evolve into military escalation. Meanwhile, Trump’s tariffs are still being met with all sorts of uncertainty with the latest being that perhaps not all countries will be hit with 15% levies – only some. Geez.
And on the latter, there’s also the thought of what is going to happen next once the 150 days are up on Section 122. In all likelihood, it won’t be extended and so it remains to be seen what Trump will have up his sleeves next.
Circling back to the AI agenda, there’s also some concerns on how the hyperscalers i.e. Google, Meta, Microsoft can keep up on capex spending to support the outlook portrayed by Nvidia. And adding to that, there’s still the whole hardware versus software debate. While the former continues to outperform, the latter is suffering from the continued AI disruption that Nvidia is powering.
So while there is optimism on the big names, there is once again perhaps a change to “the rest of the market” problem for investors. Just something to keep in mind.
