Tech Stocks Rally Following Nvidia's Strong Earnings Report
Nvidia reported Q2 revenue of $96.2B, more than doubling year-over-year and beating Wall Street's estimate.
The company projected revenue growth of roughly 70% for the next fiscal year, bringing relief to investors who had begun questioning whether the AI trade was losing steam.
Nvidia CFO Colette Kress said its next-generation Vera CPU is already shipping to early customers, including Oracle, SpaceXAI, and Amazon Web Services.
Tech stocks power higher
The Nasdaq Composite rose 1.19%, making it the top-performing major US index on the day. The S&P 500 Information Technology sector gained 2.6%, the only one of the index's 11 sectors to finish in the green.
Salesforce surged more than 20% after raising its annual revenue and profit forecasts and launching a new plug-in integrated with Anthropic's Claude AI models, its best single-day gain in six years.
CrowdStrike climbed 18% after topping Q2 earnings estimates and raising its annual revenue forecast. ServiceNow and Palo Alto Networks gained 8.6% and 11.5% respectively.
Asian chipmakers also caught a bid. South Korea's SK Hynix and Samsung rose 2.5% and 1.7%, and Japan's Kioxia rallied 5%.
Nvidia pushed back on a growing concern: that it's effectively financing its own demand by investing in the AI startups buying its chips.
The deals have drawn criticism over concerns that Nvidia is effectively financing its own customers, though the company argues the investments help expand the broader AI market.
The distinction matters because it goes to whether AI chip demand is organically sustainable. Nvidia also flagged that shortages of memory components could curb industry growth.
Its CFO noted that memory chip prices have risen sharply, with supply of high-bandwidth memory and advanced DRAM unable to keep pace with AI server demand.
Despite the tech rally, the broader market stayed cautious. The Fed's preferred inflation gauge, the PCE index, held at 3.7% in July, a three-year high, keeping rate hike talk alive.
Two Fed officials on Thursday reiterated concerns about inflation and signaled support for further tightening. All eyes now turn to Fed Chair Kevin Warsh's Friday address at the Jackson Hole symposium, his first as chair.
Analysts at Apollo Global Management expect a hawkish tone designed to keep long-term yields in check. The tech rally got its catalyst, the macro backdrop remains the wildcard.