A few billion shy
At the start of the year the majority of financial market practitioners wouldn’t be able to tell you what Nvidia was. Today it is almost a household name. Nvidia is a company who has found itself as one of the key stocks in the world this year. Arguably the most significant of the so-called magnificent seven, for a brief period earlier this year the stock you’d previously never heard of became the most valuable in the world. Today, it may sit in a lowly second place with a market cap of just shy of three trillion dollars, but its share price is still one of the most important factors in wider market sentiment.
The trading desk at Goldman Sachs this week labelled Nvidia as the most important stock in the world. They’re probably not wrong. So, when this company provided its latest set of earnings after the closing bell yesterday you can bet the world was watching. The earnings (for the last quarter observed) topped the median estimate of a meagre $31.9bn. Apparently the $600m that Nvidia earned above this median expectation was insufficient with the stock slumping some 8% in post-market trading. Ok I’m being slightly facetious here. The reason the stock fell was the lofty top-end expectations that had been one lifeline for the broader stock market rally had sought a figure of up to $37.9bn. All interest seeking a figure above the $32.5 estimate provided by Nvidia overnight therefore saw the publication as a negative.
So, has the market gone insane for entire indices and US stocks in general to fall in after hours trading as a result of the outperformance of this single stock? Yes and no. Nvidia is unfortunately one of the best (by virtue of being one of the only) barometers for the health of the fledgling AI spending trend. Its downsides as a barometer are that it is still a single company whose headline performance is complicated by factors all companies face beyond pure sector trends. Last night’s figures will likely prove to be enough to preserve strong risk appetite for now. For any further significant rallies, however, the market will likely have to seek optimism from fundamentals outside of the tech sector.
Discussion and Analysis by Charles Porter
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