The US stock market ended Wednesday little changed as investors waited for Nvidia's quarterly earnings report. The chipmaker's optimistic forecast could shape the future of the AI sector.
Day trading was in the red as market participants reacted to new statements from former US President Donald Trump about trade tariffs. He said his administration was preparing to impose 25% tariffs on imports from the European Union. Trump also hinted at a possible delay in the new tariffs for Mexico and Canada, saying they would go into effect on April 2, about a month later than originally set.
Nvidia (NVDA.O) shares jumped 2% in volatile post-market trading after the main trading session closed. The leading AI player provided quarterly guidance that beat market expectations, sparking a positive reaction from investors.
The Dow Jones Industrial Average (.DJI) ended the day down 188.04 points (-0.43%) to 43,433.12. The S&P 500 (.SPX) added a symbolic 0.81 points (+0.01%) to close at 5,956.06. The Nasdaq Composite (.IXIC) rose 48.88 points (+0.26%) to close at 19,075.26.
The growth of the technology sector (.SPLRCT) supported the market, but losses in the healthcare (.SPXHC) and consumer staples (.SPLRCS) sectors offset this effect, preventing the indices from showing significant gains.
A series of economic reports published last week point to a possible slowdown in the U.S. economy. The weak dynamics of consumer sentiment recorded on Tuesday is especially alarming. Despite this, inflation remains high, creating additional uncertainty in the market.
Shares in Intuit (INTU.O), the maker of popular tax software TurboTax, soared 12.6%. The jump came after it forecast third-quarter revenue to beat Wall Street expectations. The upbeat forecast was a rare ray of hope amid general market uncertainty.
The world's largest asset manager, BlackRock (BLK.N), has announced that it may be scaling back its focus on the Australian market, citing inflated asset valuations and weak economic growth. Instead, the company is eyeing more attractive opportunities in the US and Japan.
According to Katie Petering, who is responsible for BlackRock's investment strategy in Australia and New Zealand, the uncertainty in global markets is forcing the company to rethink its asset structure. As a result, BlackRock is focusing on diversification and reallocation of investments.
The company acknowledges the potential of the Japanese market, explaining this by successful corporate reforms and inflationary factors that contribute to the growth of companies with a strong pricing policy. In addition, BlackRock weighs in on US stocks, considering them more stable in the current environment.
Unlike the US and Japan, Australian assets, according to BlackRock analysts, are overvalued. A long period of high interest rates and weak economic growth make the market less interesting for long-term investments.
Despite the possible redistribution of assets, BlackRock still remains a major player in the Australian market. The company's portfolio includes such giants as BHP (BHP.AX), CSL (CSL.AX) and the Commonwealth Bank of Australia (CBA.AX), according to the company's official website.
Last week, the Reserve Bank of Australia (RBA) decided to cut its key interest rate, lowering it from a 13-year high of 4.35% to 4.10%. In an official statement, the regulator noted that inflation pressures were easing, but stressed that it was too early to talk about further easing of monetary policy.
Investment giant BlackRock has expressed support for the RBA's measured stance, citing ongoing labor market tensions and global uncertainty over the Trump administration's potential for new trade tariffs.
"The RBA's biggest challenge is the state of the labor market. The current unemployment rate of 4% is clearly a concern for the RBA," said Craig Vardy, head of fixed income in Australia at BlackRock.
He said such factors reduce the likelihood of further interest rate cuts that could support the consumer sector and boost growth in Australia.
Nvidia's (NVDA.O) quarterly guidance on Wednesday showed that demand for artificial intelligence chips from tech giants Microsoft (MSFT.O), Amazon (AMZN.O) and other leading companies remains robust. This comes as Chinese startup DeepSeek recently launched an affordable AI model, which has previously raised concerns about market saturation and overspending.
Nvidia shares rose nearly 2% in extended trading after the report, as investors cheered the fact that the world's largest AI chipmaker forecast quarterly revenue above analysts' expectations.
Meanwhile, shares of Nvidia's top customers — Microsoft, Amazon, Alphabet (GOOGL.O) and Meta Platforms (banned in Russia) — were stable, with no significant changes. These companies, part of the so-called "Magnificent Seven" of market leaders, continue to invest rapidly in artificial intelligence, increasing their presence in the space after the launch of ChatGPT in 2022.
Key tech stocks have been on the decline in recent weeks, and market participants have become more cautious. Despite Nvidia's impressive 78% quarterly revenue growth, the company warned that its margins would shrink to 71% in the first quarter, below the 72.2% expected. This is due to the rapid expansion of production of its latest Blackwell AI chips.
"While the market is concerned about the efficiency of the DeepSeek model and the initial difficulties of deploying Blackwell, Nvidia's report confirms its undisputed leadership in AI," eMarketer analyst Jacob Born said. According to him, competitors are making strides, but advanced AI models require powerful computing resources, which Nvidia provides.
Against this backdrop, shares of chip makers Broadcom (AVGO.O) and Marvell (MRVL.O) added 1% each, following the positive dynamics of Nvidia.
The entry of budget AI models from Chinese startup DeepSeek last month raised concerns among investors that it could lead to a decrease in demand for Nvidia's most expensive processors. This triggered a record drop in the company's capitalization by half a trillion dollars in one day - an anti-record for Wall Street.
Additional concerns were raised by analysts' reports that Microsoft (MSFT.O) is revising its plans for leasing data centers, which could affect demand for equipment from Nvidia and other manufacturers of AI infrastructure.
The largest tech companies, part of the "Magnificent Seven", have begun to roll back from the record highs of late 2024. The Roundhill Magnificent Seven ETF has lost more than 11% from its December 17 peak, suggesting that the group of tech leaders is entering a correction phase.
Nvidia has consistently beaten analysts' estimates over the past two years, but the gap between actual and expected performance is gradually narrowing. This is because the company is now competing with its own records from a year ago, when demand for AI solutions began to skyrocket.
Since ChatGPT launched in November 2022, the market capitalization of the Magnificent Seven companies has increased by a whopping $11 trillion, reaching an all-time peak in December 2024. Nvidia has been one of the biggest beneficiaries of this wave, with its market value rising by $2.7 trillion during the period, and the company itself taking second place in the world by market capitalization, reaching $3.2 trillion.
However, Nvidia's January stock slump following the emergence of budget AI models from DeepSeek clearly demonstrated that even the biggest players are not immune to market shocks.
The launch of more affordable AI solutions from Chinese startup DeepSeek has alarmed investors, causing a record one-day drop in Nvidia's market cap. However, analysts are confident that DeepSeek's impact is limited: despite the competition, demand for Nvidia's high-performance chips remains resilient.
"DeepSeek has triggered a wave of fears in the market, but Nvidia has an undeniable first-mover advantage. In addition, tech giants such as Meta (banned in Russia) continue to invest aggressively in AI infrastructure. This suggests that Nvidia's premium chips will remain at the center of demand," notes Suzanne Streeter, head of finance and markets at Hargreaves Lansdown.
So despite the temporary shocks, Nvidia continues to maintain its leadership in an industry where computing power remains a key factor for success.
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