Nvidia delivers quarterly earnings that smash expectations as the chipmaker and AI darling proclaims that computing has entered a “new era.” The results push Nvidia shares higher in premarket trading. Meanwhile, a yearly gathering of central bankers in Jackson Hole, Wyoming is set to begin, with investors focused on comments from Federal Reserve Chair Jerome Powell on Friday.
1. Nvidia beats expectations
Nvidia’s (NASDAQ:NVDA) second quarter revenues crushed lofty Wall Street estimates, sending shares higher in premarket U.S. trading on Thursday, as the California chipmaker was boosted by the intensifying frenzy over generative artificial intelligence.
Estimates heading into the earnings were already sky-high, with some sources reportedly calling for sales of $12 billion in the three months ended on July 30 and $14B in the third quarter.
But even those expectations proved to be modest. Revenue came in at $13.5B during the second quarter, more than doubling the prior mark of $6.7B. Nvidia also projected that sales in the current quarter, set to finish in October, would come in at $16B.
The numbers highlight how central Nvidia has become to this year’s hype over AI. The group has long invested in manufacturing graphics processors that power the burgeoning technology, putting it in pole position to benefit from soaring AI demand.
“A new computing era has begun,” Nvidia Chief Executive Jensen Huang said in a statement on Wednesday, adding that the “race is on” to adopt generative AI.
2. Nvidia’s suppliers rally
The global impact of Nvidia’s stellar release was felt in Asia, where the firm’s regional suppliers rose sharply on Thursday.
TSMC (TG:2330y) (NYSE:TSM), Asia’s biggest chipmaker and a key supplier to Nvidia, jumped by 3.7%, while its U.S. listing moved up by over 3% in premarket dealmaking. South Korea’s SK hynix Inc. (KS:000660), which provides Nvidia with memory chips, also climbed by 4.2%.
A prediction from Huang that the AI boom will last well into next year — as well as a $25B share buyback announcement — fueled a rally across most tech stocks in Asia. Chinese heavyweights Baidu (HK:9888) (NASDAQ:BIDU) and Alibaba Group (HK:9988) (NYSE:BABA) rose in Hong Kong, pushing up their New York listings premarket as well.
Baidu in particular was among the best performers in the region, lifted by strong quarterly returns that were themselves supported by AI demand.
3. ‘Higher for longer’ debate rages ahead of Jackson Hole
Central bankers from across the world will begin an annual two-day economic symposium on Thursday in Jackson Hole, Wyoming, with markets eager to receive any clues about the future direction of interest rate policy.
Much of the conversation ahead of the event has swirled around the implications of recently stronger-than-anticipated U.S. economic data. Fed officials have in recent days floated the idea that the numbers may suggest that another uptick in borrowing costs could be appropriate, confounding some market predictions that cooling inflation would persuade the U.S. central bank to start stepping back from a long-standing tightening campaign. Indeed, policymakers even flagged “upside risks” to price growth in the minutes of the Fed’s latest meeting.
But the issue was further complicated by figures on Wednesday that indicated that U.S. business activity growth was its weakest since February. U.S. Treasury yields, which soared last week, slipped as traders guessed that the Fed now had less headroom to keep interest rates higher for longer.
The Fed has previously stressed that it will remain “data-dependent” — however, what it actually makes of the current numbers remains uncertain. Investors are hoping that a speech by Federal Reserve Chair Jerome Powell from Jackson Hole on Friday may provide more clarity.
4. Futures mixed amid Nvidia earnings, Jackson Hole event
U.S. stock futures were mixed on Thursday as investors digested Nvidia’s better-than-anticipated results and looked ahead to the beginning of the Jackson Hole symposium.
At 05:26 ET (09:26 GMT), the Dow futures contract dropped by 36 points or 0.10% and S&P 500 futures rose by 23 points or 0.52%.
Futures for the tech-heavy Nasdaq 100 was the standout performer, increasing by 172 points or 1.13%, reflecting the excitement sparked by Nvidia’s numbers and bullish outlook.
Earlier this year, a sterling first quarter report from Nvidia helped drive a broader AI-inspired stock market rally. Prior to its latest earnings, analysts were predicting that strong returns could have a similar impact.
5. Oil volatile following mixed stockpile report
Oil prices inched higher, paring back earlier losses, on Thursday after a mixed stockpile report from the Energy Information Administration.
Data on Wednesday showed an unexpected, substantial build in U.S. gasoline and distillate inventories over the past week, which pointed to weakening U.S. fuel demand. However, crude inventories saw a larger-than-anticipated draw of 6.1 million barrels to 433.5M barrels, bringing the number 2% below its five-year average.
By 05:26 ET, the U.S. crude futures traded 0.1% lower at $78.97 a barrel, while the Brent contract rose by 0.1% to $83.31.