Nvidia shares pop as analysts dismiss AI bubble concerns
Investing.com - U.S. stock futures soared Thursday after strong numbers from AI darling Nvidia eased concerns surrounding the heightened valuations in the heavily-weighted tech sector. More earnings from retail giant Walmart are scheduled, as well as the eagerly anticipated September official jobs report.
1. Nvidia surpasses bullish expectations
Nvidia (NASDAQ:NVDA) has provided global markets with a positive jolt, as the chipmaker’s stellar third-quarter earnings and fourth-quarter forecast calmed, for now, investor nerves that the artificial intelligence (AI) boom has resulted in unsustainable valuations.
The world’s most valuable company posted third-quarter sales growth of 62%, the first acceleration in seven quarters, and also said it expected fiscal fourth-quarter sales of $65 billion, plus or minus 2%, compared with analysts’ average estimate of $61.66 billion, according to data compiled by LSEG.
CEO Jensen Huang shrugged off concerns about an AI bubble, doubts that had pushed Nvidia’s shares down nearly 8% in November, after a surge of 1,200% in the past three years.
"There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different," CEO Jensen Huang said on a call with analysts.
Huang also reiterated that AI-fueled demand for Nvidia’s chips remained strong beyond just Wall Street’s hyperscalers, and that the company was set to continue benefiting from this trend in the coming quarters.
"We’re in every cloud. The reason why developers love us is because we’re literally everywhere," he said. "We’re everywhere from cloud to on-premise to robotic systems, edge devices, PCs, you name it. One architecture. Things just work. It’s incredible."
Huang also reiterated a forecast from last month that the company had $500 billion in bookings for its advanced chips through 2026.
Adding another potential tailwind, the Donald Trump administration is asking Congress to reject a proposed measure that seeks to limit Nvidia’s ability to sell artificial intelligence chips to China and embargoed countries, Bloomberg reported.
2. U.S. futures jump on Nvidia’s beat
U.S. stock futures rose strongly Thursday after Nvidia’s earnings beat helped to restore confidence, particularly in the heavily-weighed technology stocks.
At 03:20 ET (08:20 GMT), the S&P 500 futures traded 85 points, or 1.3%, higher Nasdaq 100 futures climbed 430 points, or 1.8%, and Dow futures rose 290 points, or 0.6%.
All three major U.S. stock indexes closed higher on Wednesday, snapping a four-day slide for both indexes, but are still on course for a negative week given the depth of the recent pullback.
Nvidia shares soared premarket after its highly anticipated quarterly results beat expectations, while its upbeat guidance has lifted investor sentiment around the AI trade.
Elsewhere, retail giant Walmart is also set to release its quarterly results, while the Bureau of Labor Statistics will release September nonfarm payrolls data, which was delayed by the U.S. government shutdown.
“Should the jobs data fail to swing the market towards a Fed cut in December (currently 50% priced), then pressure remains on equity markets,” said analysts at ING, in a note.
3. Nonfarm payrolls up next
The U.S. Labor Department’s closely watched employment report for September will be released later in the session, and is likely to confirm consistently sluggish conditions within the important labor market.
The report was delayed by the 43-day shutdown of the government, which has also resulted in the cancellation of the October report, elevating the significance of this release ahead of the next Federal Reserve meeting.
The Fed will still lack much of the data it usually relies on at the time of its next policy meeting on December 10, with the next jobs report now postponed until six days later to December 16.
Nonfarm payrolls likely increased by 50,000 jobs in September, which would be more than double the 22,000 positions added in August, while the unemployment rate held steady near a four-year high of 4.3%.
“In years past a ~50K monthly jobs pace would be a bright green light for the Fed to slash rates, but in current environment, with a much lower break-even level (the break-even level for the U.S. economy might only be around 50K or less) and elevated inflation, the central bank won’t be as quick to act,” said analysts at Vital Knowledge, in a note.
4. Walmart due to report earnings
Walmart (NYSE:WMT), the largest retailer in the world, will become the latest company from the important sector to report earnings later in the session, offering potential insights into the outlook for the crucial holiday shopping season.
Analysts expect Walmart to report $177.5 billion in revenue, a roughly 4.7% increase from a year earlier, resulting in about $0.60 in earnings per diluted share, up from $0.58 a year earlier.
These results will come after the retail titan said CEO Doug McMillon will retire next year after more than a decade in charge.
Since taking the job in 2014, McMillon has overseen a tripling in Walmart’s value to $817 billion, underpinned by a longstanding effort to battle Amazon in e-commerce sales.
The sector has seen mixed results so far this week.
Target (NYSE:TGT) lowered the upper end of its full-year earnings guidance and reiterated that it expects sales to drop in the current quarter, while Home Depot (NYSE:HD) forecast a bigger drop in full-year profit.
On the flip side, Lowe’s (NYSE:LOW) reported third-quarter adjusted earnings that exceeded analyst expectations, and lifted its full-year 2025 sales outlook.
5. Crude set for weekly gains
Oil prices rose Thursday, on course for weekly gains, helped by a bigger-than-expected draw in U.S. crude stockpiles.
Brent futures gained 0.6% to $63.86 a barrel, and U.S. West Texas Intermediate crude futures rose 0.6% to $59.59 a barrel.
Both contracts are set to post weekly gains of over 1%, ahead of the November 21 deadline set by the U.S. for companies to wind down their business with Rosneft and Lukoil, Russia’s two biggest oil producers.
Lending some support to prices was the bigger-than-expected draw in U.S. crude stockpiles reported on Wednesday, as crude inventories fell by 3.4 million barrels in the week ended November 14, the Energy Information Administration said.
Crude prices fell sharply on Wednesday following a Reuters report that the U.S. had signalled to Ukraine to accept a U.S.-drafted framework to end the war with Russia.
(Reuters contributed reporting.)