(Feb 27): Wall Street traders lifted stocks away from session lows as oil erased its gain amid signs of progress in US nuclear talks with Iran. Chipmakers sank as Nvidia Corp’s results failed to inspire investors seeking reassurances about artificial intelligence (AI). Bonds climbed.
While the S&P 500 fell, about 350 of its shares advanced on Thursday. The Nasdaq 100 lost 1.2%. Even after giving a bullish forecast, Nvidia tumbled 5.5%, dragging down almost every company in a key semiconductor gauge. Salesforce Inc gave a strong estimate for long-term sales and announced a large share buy-back, assuaging some fears about AI disruption of the software industry.
In late hours, Dell Technologies Inc gave an outlook for sales of its AI servers that exceeded estimates. CoreWeave Inc, an operator of AI data centres, reported a bigger loss than anticipated. Jack Dorsey’s Block Inc is cutting 4,000 employees, reducing its workforce by nearly half as the financial technology firm places a bet on AI changing the future of labour productivity.
The mixed Wall Street response to earnings reflects uncertainties swirling around the revolutionary technology. After soaring for much of the past few years, Nvidia has gone cold amid questions about massive AI spending. Meanwhile, traders have been fleeing companies seen as potentially under threat of being displaced.
The reason why investors didn’t launch into a frenzy after seeing revenue, net income, and guidance come in way better than expected is that Nvidia rarely misses on those metrics, according to Hardika Singh at Fundstrat Global Advisors.
“But where it did miss was easing investors’ concerns about its narrowing moat in the evolving world of compute and explaining its gameplan for how it will fare in a world of AI disruption that could upend all kinds of businesses from cybersecurity to food delivery to banks,” she said.
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Michael Burry, who made his name shorting the US housing market, added to the worries. He noted that Nvidia has purchase obligations of US$95.2 billion, compared with US$16.1 billion a year earlier. That could be risky if demand wavers.
The S&P 500 lost 0.5%. The yield on 10-year Treasuries fell four basis points to 4.01%. The dollar wavered. Oil fell 0.3%. The US and Iran will continue talks next week after making “significant progress”, mediator Oman said.
Nvidia’s earnings and guidance were good, but there are still some questions about whether the firm can maintain its huge gross margins going forward, according to Matt Maley at Miller Tabak.
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As we move into March, he sees a few issues that could create some headwinds. Whether it be anxiety over AI profitability, worries over the impact of that technology on several sectors or concerns surrounding the private-credit market, Maley said there are plenty of reasons to think next month will be a rough one for stocks.
“However, momentum is a very powerful force in the marketplace,” he added. “So, if we can see a further advance as we move into March, we might finally see the broad market experience another rally leg off of the 2022 bear-market lows.”
Uploaded by Isabelle Francis
