Nvidia breathed new life into the stock market’s sagging AI trade — for a few hours, at least.
The tech sector rebounded early Thursday as investors took in the chipmaker’s blockbuster earnings for the third quarter and renewed their confidence in the artificial intelligence boom. Shares of the chip maker popped 5%, lifting other tech and AI names.
That quickly reversed as fears of an AI bubble retook the center stage. The Dow, which climbed as high as 700 points, was down less than 1% by midday Thursday. The S&P 500 and Nasdaq rose more than 1% in the morning before falling into the red.
Nvidia, the most expensive company in the world by market cap, rose as high as 5% before slipping into the red as well.
Here were some of the biggest moves in the tech sector:
Here’s where US indexes stood around 1 p.m. on Thursday:
A strong September jobs report also briefly fueled gains on Thursday, but the enthusiasm waned as investors grappled with still-slim odds that the Fed could cut rates next month. Although the unemployment rate ticked up to 4.4% in September, the CME Fedatch Tool showed that the odds of a 25-basis-point cut in December were still under 50% at midday.
The CME FedWatch Tool showed the odds of a cut ticked up slightly after the data. The two-month-old report will be the last labor update before the Fed’s next meeting.
Confidence in the AI-fueled stock rally had been waning in recent weeks as investors fretted over high valuations and surging capex being directed to AI spend.
But Nvidia, seen as a bellwether for the AI trade, soothed much of the worries about whether demand for AI chips will persist. The Jensen Huang-led firm reported $57 billion in revenue for the quarter, a 62% year-over-year increase. Revenue from its data center business totaled $51.2 billion, up 66% year-over-year.
The firm estimated it will pull $65 billion in revenue for the current quarter, beating analysts’ estimates for guidance of $61 billion.
“It has been many decades since one stock could move the market like Nvidia,” David Rosenberg, a top economist and the president of Rosenberg Research, wrote in a note to clients on Thursday. “The company did indeed deliver across the top line, bottom line, and forward guidance after the bell yesterday. The results kyboshed the malaise in the growth of the past several weeks.”
Huang’s comments to investors last night were exactly what tech bulls “NEEDED to hear,” Dan Ives, an analyst at Wedbush Securities, said.
“In a nutshell there is one company in the world that is the foundation for the AI Revolution and that is Nvidia with the Godfather of AI Jensen having the best perch and vantage point to discuss overall enterprise AI demand,” Ives and other analysts wrote in a note.
Despite renewed optimism, some think that concerns about an AI bubble are still justified.
“This remains a bubble of epic proportions, keep that in mind,” Rosenberg, who has repeatedly warned of a price bubble in risk-assets, said. “Color me a skeptic that the total size of the AI market is going to swell eightfold in the next half-decade, which is what is currently being priced in.”