Nvidia Earnings Upset Brings Nasdaq Lower
The Nasdaq Composite slid on Thursday after days of gains as Nvidia's stock dropped sharply due to AI spending fears.
Quick overview
- Nvidia reported quarterly earnings of $68.127 billion, exceeding expectations, but their stock fell 4.88% due to concerns over heavy spending.
- The Nasdaq Composite dropped 1.84%, signaling a halt to a recent short bull trend following Nvidia's disappointing stock performance.
- Investors are increasingly scrutinizing AI companies, leading to selling pressure on stocks with high AI expenditures amid fears of job disruption.
- Salesforce's stock rose 2.5% despite lower revenue projections, while Paramount Skydance's stock climbed 6% due to investor optimism about its acquisition plans.
The reaction to Nvidia’s quarterly earnings is a perfect example of how much pressure is on AI companies to pull back on their capital expenditures.
Nvidia (NVDA) blew quarterly earnings expectations out of the water with an impressive $68.127 billion, which was more than the $65 billion estimated. They also beat the EPS (earnings per share) of $1.52 with $1.62 for the quarter. Despite their exceptional gains, their stock dropped 4.88% on Thursday as the market reacted to another quarter of heavy spending.
The Nasdaq Composite dropped as well, pulled down by Nvidia’s earnings to lose 1.84% for the day. That drop followed two days of gains and signaled an end to the short bull trend. Many of the increases earned after this week’s State of the Union address have been wiped out by the downturn.
Wider Market Trends Lower
All three major indices closed higher on Tuesday following President Donald Trump’s very positive economic outlook and triumphant address to the nation. But the market was still waiting to hear from Nvidia and see how investors would react to the company’s earnings statement. The reception was poor despite excellent earnings, and the S&P 500 dropped 1.24% on Thursday.
That was a greater drop than the index’s gains the previous day, wiping out all recent progress. The Dow Jones Industrial Average fell as well on Thursday, losing 0.16% and giving the best showing of the three top indices. The S&P 500 and Nasdaq are tech heavy indices in comparison, so they would be more strongly affected than the Dow by Nvidia’s earnings.
Investors are closely watching tech stocks and particularly AI ones, placing intense selling pressure on stocks from companies where AI spending is the heaviest. The market is also concerned about the threat of AI disruption to jobs, and these types of stocks are under intense scrutiny.
Salesforce (CRM) fared better than Nvidia, with a 2.5% increase in stock price following tis quarterly report. That may surprise investors who noticed that their revenue projections were lower than Wall Street anticipated.
One of the biggest movers on Thursday has been Paramount Skydance (PSKY). The company is working to buy Warner Bros. Discovery, and their stock climbed 6%. They also underperformed this quarter, with their TV Media unit pulling in 5% less revenue than the previous year and their overall first quarter revenue coming in below expectations. However, their stock performance this quarter is not based primarily on revenue but more so on how their streaming service is doing and how strongly investors believe they can make the Warner Bros. acquisition.
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