United States
Not even a record-breaking quarter from the world’s most important chipmaker could save Wall Street from a bout of AI anxiety overnight.
As of 1:40pm New York time, the S&P 500 dropped 1.1% as Nvidia’s results, while objectively stellar, left investors cold. The Nasdaq 100 fared worse, shedding 1.7%, while the Dow Jones Industrial Average slipped 0.5%. Most stocks in the S&P 500 actually rose on the session, but the sheer weight of the semiconductor selloff dragged the broader index lower.
Nvidia tumbled more than 5% despite posting quarterly revenue of US$68.1 billion and a surge in free cash flow of nearly US$20 billion year-on-year. The company crushed expectations on virtually every metric and delivered a bullish forward outlook, yet the market’s response was a collective shrug. The Philadelphia semiconductor index lost more than 4%, with Broadcom shedding 6%.
The problem, in essence, is that expectations have become so elevated that merely beating them is no longer enough. As one market commentator put it, companies now need to “beat the beat.” There are also growing questions about whether Nvidia can maintain its outsized gross margins and defend its competitive position as the AI landscape evolves rapidly. Adding to unease, reports highlighted that Nvidia’s purchase obligations have ballooned to US$95.2 billion, up from US$16.1 billion a year earlier, a figure that could prove problematic if demand softens.
In a notable divergence, software stocks staged a sharp rebound as the rotation trade gathered pace. Salesforce rallied after delivering a strong long-term sales outlook and announcing a large share buyback, easing fears about AI disruption in the software sector. Atlassian surged more than 6%.
On the economic front, weekly jobless claims came in below expectations, suggesting the labour market remains resilient. In a milestone for the housing sector, the average 30-year mortgage rate dipped below 6% for the first time since 2022. Treasury yields edged lower, with the 10-year falling three basis points to 4.02%.
Elsewhere, Warner Bros. Discovery reported weaker fourth-quarter sales as it weighs competing takeover bids, and Hertz posted a larger-than-expected quarterly loss.
Europe
European equities finished virtually unchanged as chip machinery stocks bore the brunt of Nvidia’s uninspiring results, while a rotation into AI disruption victims provided a partial offset.
The Stoxx Europe 600 ended flat, a day after closing at a record high. ASML was the biggest drag on the index, falling 4.3% in sympathy with the broader semiconductor selloff. However, stocks that had been punished over fears of AI displacement bounced back strongly, with UBS’s EU AI Risk basket gaining 3.8%. Software names such as SAP, advertising groups including WPP, and professional publishers like Wolters Kluwer all clawed back some of this year’s losses.
Buyback announcements provided a tailwind for individual names. Rolls-Royce surged as much as 8.4% to a record after unveiling a share repurchase programme, while London Stock Exchange Group jumped 9.1% on plans to buy back £3 billion of stock. Spanish IT firm Indra Sistemas soared 21% after fourth-quarter results that beat across the board.
On the downside, grocery technology group Ocado fell 6.4% after flagging significant job cuts alongside its preliminary results, while Hikma Pharmaceuticals slumped 17% following a disappointing update.
The broader picture remains constructive for European equities, which are heading for an eighth consecutive month of gains. A positive earnings season and the region’s tilt towards old economy sectors have shielded it from the worst of AI-related volatility, fuelling ongoing rotation out of US markets and into European names.
Australia
The local market is poised for a softer open on Friday after the overnight tech selloff, with ASX 200 futures down 25 points, or 0.3%, to 9,115 near 5.15am AEDT.
That follows an impressive session on Thursday, where the S&P/ASX 200 climbed 47 points, or 0.5%, to 9,175.3, touching an intraday record of 9,202.9. The index is up roughly 3.5% for February, on track for its best month since April.
A strong reporting season has been the driving force, with heavyweight miners and banks delivering solid results. BHP rose 2.2% to its best-ever close, extending its weekly gains past 8%, while Rio Tinto added 3.7% as copper and iron ore firmed. BlueScope Steel dipped 2.3% after rejecting a $14.2 billion takeover approach from SGH and Steel Dynamics, arguing the offer undervalued the company.
Tech stocks rallied hard on Thursday before Nvidia’s after-hours disappointment. WiseTech Global gained 2.6%, TechnologyOne surged 6.4%, Xero jumped 8.6%, and Megaport soared 12.6%. Whether those gains hold on Friday is another question entirely.
Healthcare was another bright spot, with Ramsay Health Care climbing 10.4% after beating profit expectations and Pro Medicus leaping 9.8%. Qantas was the session’s biggest casualty, tumbling 9.2% to a two-month low as concerns about its international operations overshadowed a better-than-expected profit. Worley also copped a hiding, falling 10.2% after restructuring charges dragged profit down by roughly a third.
Friday brings results from Coles, Harvey Norman, TPG Telecom and Star Entertainment, among others, with private sector credit data due at 11.30am.
Commodities and currencies
Oil prices firmed overnight as Iran flagged that nuclear talks with the United States were intensifying. Brent crude rose 1.6% to US$72 a barrel, while West Texas Intermediate added 1.5% to US$66.39. Iron ore was little changed at US$98.30 a tonne.
Gold edged 0.1% higher to US$5,170.23 an ounce, consolidating near recent highs.
The Australian dollar weakened 0.6% to 70.79 US cents as the greenback strengthened broadly. The euro slipped 0.3% to US$1.1776, while the British pound fell 0.8%.
Bitcoin dropped 2.8% to US$67,015, with ethereum losing 5.2%.
Economic Calendar
US:
- Producer Price Index 00:30
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
