Nvidia weighs on Wall Street, ASX set to slide
Stan Choe
Updated ,first published
Nvidia’s latest big earnings report was ignored by Wall Street on Thursday, dragging the U.S. market lower even though most stocks are higher.
The S&P 500 index fell 1.1 percent after its rise at the beginning of the week, driven by the hopes and concerns created by the artificial intelligence revolution. The Dow Jones was down 204 points, or 0.4 percent, and the Nasdaq composite was 1.8 percent lower.
The Australian share market is poised for a decline, with futures trading up 21 points, or 0.2 percent, at the open. The ASX gained 0.5 per cent on Thursday. The Australian dollar was down at 5.23¢70.80 at 70.80 AEDT. The reporting season ends today with Harvey Norman and Virgin Australia among the companies set to end today.
Nvidia, whose chips are helping power the AI boom, reported another quarter of profit growth that beat analysts’ expectations. At the same time, revenue estimates for the current quarter once again exceeded Wall Street’s estimates.
But such explosive performances have become so typical of Nvidia that they are losing their appeal. Its shares lost 4.6 percent of their value. It was down as much as 5.6 percent in early morning trading and was heading for its worst loss since April.
“Our customers are racing to invest in AI computing, the factories that power the AI industrial revolution and their future growth,” said Nvidia CEO Jensen Huang.
However, concerns are growing that these customers may eventually reduce their spending on Nvidia chips and other AI investments, amid doubts about whether they can recoup all of their billions of dollars through future gains in productivity.
Since Nvidia’s value is the largest stock in the US market, it has more influence on the S&P 500 than any other. It alone accounted for more than half of the decline in the S&P 500. That’s a big part of why the index is falling, even though most of the stocks within it are rising.
On Wall Street’s winning side on Thursday was Salesforce, which also rose 2.9 percent after reporting a stronger profit than analysts expected in the latest quarter.
This marks a return to earnings for the stock, which has fallen about 25 percent so far in the young year. It is under pressure due to concerns that AI-powered rivals could disrupt its business.
Salesforce uses AI itself in its offerings that help customers manage their relationships with their own customers. It also made several announcements that often boosted stock prices: It will send up to US$50 billion to shareholders through share buybacks and increased its dividend.
“Agent AI is a tailwind for our business,” said CEO Marc Benioff.
Shares of companies ranging from trucking logistics to financial services have also come under sudden and aggressive attacks this year from investors who fear their businesses will be defeated by artificial intelligence or even become obsolete.
The sharpest swings have hit software companies, and the widely followed ETF that tracks the sector rose 2.1 percent on Thursday, narrowing its loss for the year to 21.9 percent.
World Economic Forum Chief Executive Børge Brende announced overnight that he is resigning from his post following revelations that he had ties to convicted pedophile Jeffrey Epstein.
A new set of documents in the Epstein files showed that Brende arranged to meet the financier for dinner at his New York home in 2018 and 2019. The second of these meetings was planned just weeks before Epstein was arrested in the United States on sex trafficking charges. He died in prison in August of that year.
WEF announced earlier this month that it had launched an investigation into Brende and her relationships with Epstein. The former Norwegian foreign minister said at the time that he was “completely unaware of Epstein’s past and criminal activities” but acknowledged he should have been more detailed.
The WEF investigation is now concluded, forum co-chairs Andre Hoffmann and Larry Fink said in a statement on Thursday, adding that the findings showed “there are no additional concerns beyond those previously disclosed.”
In a statement Thursday, Brende said he was resigning “after careful consideration,” though he did not mention Epstein or the investigation. His role lasted more than eight years.
The WEF is known for the high-profile meeting it holds annually in the Swiss mountain town of Davos. The resignation adds to the turmoil he has experienced over the past year. Schwab left in the spring amid accusations of financial misconduct and disagreements with remaining leaders. He was eventually cleared, but only after a month-long investigation that hung over the organization.
Elsewhere on Wall Street, Warner Bros. Discovery shares fell 0.1 percent after the entertainment giant reported a loss of $252 million in the fourth quarter. This doesn’t seem to bother investors who are more interested in which acquisition offer the company and its shareholders will ultimately accept (Netflix or Paramount Skydance).
One of the sharpest fluctuations in financial markets occurred in oil; Prices soared as the United States and Iran held indirect talks to reach an agreement on Iran’s nuclear program.
A peaceful solution would eliminate the threat of war, which investors worry could disrupt the global flow of oil and raise its prices. The U.S. military has assembled the largest force of American warships and aircraft in the Middle East for decades, increasing the risk. According to strategists at Macquarie, the current round of talks looks like a “make it or break it” situation.
The benchmark US crude oil briefly dropped to $63.60 a barrel. However, it quickly erased that loss and subsequently rose 1.1 percent to $66.54. Brent crude oil also erased its previous loss and rose 2 percent to $72.07 per barrel.
Indices in foreign stock markets recorded a moderate rise in Europe after the mixed closing in Asia.
South Korean Kospi broke a new record with an increase of 3.7 percent, driven by gains in technology-related stocks. It has already increased by almost 50 percent since the beginning of the year.
Meanwhile, in Hong Kong, the Hang Seng lost 1.4 percent.
In the bond market, Treasury yields declined. The yield on the 10-year Treasury note fell to 4.02 percent from 4.05 percent at the end of Wednesday.
The number of U.S. workers applying for unemployment benefits rose last week, but not by as much as economists expected, a report showed. It also remains relatively low compared to history.
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