The Nasdaq rose more than 1% after an extremely strong outlook from Nvidia gave a boost to the artificial intelligence hype that has fueled tech/AI stocks this year.
Nvidia is trading more than 7% higher in pre-market trading after the company delivered its third consecutive revenue forecast that easily beat analysts' estimates. The chip giant and AI chip market leader announced that revenue for the three months ending in October (Q3) will be around $16 billion, eclipsing analysts' estimate of $12.5 billion. Nvidia also reported astronomical revenue growth. Nvidia's core data center business, which includes sales of Nvidia's generative AI GPUs A100 H100 chips, reported 171% year-over-year revenue growth. Nvidia as a whole saw revenue jump 88% (year over year). Earnings per share were also well above expectations, thanks to a massive increase in gross profit margin from 45.9% in the previous quarter to 71.2%.
Other AI-related stocks such as Microsoft, Amazon, Alphabet or chip stocks such as Broadcom, AMD, Applied Materials also surged after Nvidia's stellar earnings report.
Technology stocks will outperform today and put pressure on typical defensive sectors like healthcare or defensive consumer stocks.
The results from Nvidia are extremely strong – even above already optimistic expectations – and show the massive revenue growth potential in the AI sector. The AI theme has been little affected by the cyclical aspects of the economy and signs of slowing demand, which could help Wall Street extend gains.
In addition to the excitement surrounding Nvidia, investors are optimistic that interest rate hikes are near an end and bond yields have fallen in recent sessions. Focus will turn to the meeting of central bank leaders in Jackson Hole, where Fed Chairman Jerome Powell is scheduled to speak on Friday.
In commodities, European natural gas prices fell after signs that a labor dispute at Australia's largest LNG export facility could be resolved, easing fears of one of three possible strikes in the key exporting country. Oil prices continue to move sideways in the $78.00 – $80.00 range (WTI). Gold benefited from a sharp decline in US Treasury yields yesterday, but has stabilized today.
The EUR and GBP in particular continue to face headwinds as there were strong signs of further economic slowdown in Europe yesterday, significantly reducing expectations for a rate hike by the ECB and Bank of England. Despite the improving risk sentiment, we do not see commodity prices rising today – also due to demand for the USD as the US economy remains robust (for now) and clearly expansionary in contrast to economies in e.g. Europe and much of the world.
👁 ROB'S MARKET OVERVIEW:
August 24, 2023
🇺🇸 US Markets ↕️/↗️
Cyclical Stocks ↕️/↗️
Tech/Growth Stocks ↕️/↗️ (Strong opening, some profit taking. Strong gains for chip & AI stocks)
Financial Stocks ➡️
Defensive Stocks ➡️/↘️
Energy Stocks ↘️/➡️ (seeing first losses due to rotation to tech, then stabilize)
Materials Stocks ➡️/↘️
💱 Forex
USD ↗️
EUR ➡️
CHF, CAD ➡️/↘️
GBP, JPY, AUD ↘️
⚒ Commodity Markets ↕️
Oil prices ↘️/➡️ (range $78 – $80 for WTI – with signs for more temporary weakness)
Natural Gas prices ↘️
Metal prices ➡️/↘️
Precious Metal prices ➡️/↘️ (after slide in yields yesterday, stabilizing yields will lead so slight correction)
⚡️Cryptos ➡️/↘️ (confidence in cryptos remains negative after recent losses; tech/AI stocks more attractive than cryptos)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Yours, Robert
