Nvidia's strong earnings report and an optimistic long-term revenue forecast for fiscal year 2028, projecting a 70% increase, significantly boosted US markets. This forecast, well above the 45% anticipated, sent Nvidia shares up 7.3% to $225 in extended hours, resulting in a market capitalization of $5.1 billion. The chipmaker's exceptional performance, with revenue 4.4% ahead of expectations and adjusted earnings per share beating by 5.9%, reinvigorated bullish sentiment in US markets, with futures indicating rises for the S&P 500 and Nasdaq.
The AI bellwether's success stemmed from surging demand for its computing platforms and an "extraordinary business" delivering triple-digit revenue and profit growth. This strong showing helped ease investor fears about the fading AI boom and confirmed that the AI build-out would continue at full speed, largely benefiting Nvidia. This positive sentiment extended to other AI-linked chip stocks, with Intel, Micron, Broadcom, and SK Hynix seeing gains between 1.3% and 3.5%, contributing to a nearly $150 billion rally in the sector. Additionally, AI cloud computing companies backed by Nvidia, such as CoreWeave and Nebius, rose between 2% and 4.5%.
However, the bullishness did not uniformly extend to European markets, which saw declines. The FTSE 100 fell 0.57% to 10,816 points, and the Stoxx Europe 600 was down 0.4% to 654 points, primarily due to the limited presence of AI industries in Europe. Despite Nvidia's significant boost to UK tech-related stocks like Computacenter and Scottish Mortgage Investment Trust, it was insufficient to lift the FTSE 100, which was dragged down by oil producers and miners. The overall market mood was further dampened by US inflation data, showing the Federal Reserve's preferred gauge remained at a three-year high of 3.7% in July, leading to investor wariness ahead of the Jackson Hole symposium.
Nvidia's performance highlighted its critical role as a bellwether for the AI market, with its chips powering most major data centers globally. Major customers, including Microsoft and Meta Platforms, reinforced expectations for substantial AI infrastructure spending, projecting over $730 billion this year, a significant increase from $400 billion last year. Despite its shares being up more than 12% year-to-date, trailing the Philadelphia SE Semiconductor index's over 60% rise, Nvidia's results continued to solidify the AI investment thesis, with at least 16 brokerages raising their price targets on the stock due to strong demand for its next-generation Rubin AI processors. The company trades at a forward price-to-earnings ratio of 17.9, notably lower than rivals like Advanced Micro Devices (37.2 times) and Intel (46.2 times), indicating that analyst expectations for its earnings have risen faster than its share price.
