Equities drop as Nvidia sinks and tariff concerns rise

General market commentary

U.S. equities closed lower on Thursday, largely driven by a sharp decline in Nvidia's shares, which tumbled 8.5%, wiping out over $270 billion in market value. Despite reporting better-than-expected earnings, investor concerns about slowing growth and shrinking margins led to a weaker-than-expected gross margin forecast for the AI chip leader. This triggered sell-offs in other chipmakers like Broadcom and Advanced Micro Devices, while Salesforce's forecast for lower-than-expected revenue also pressured its share price. The broader market was impacted by rising trade tensions, with President Trump reiterating the implementation of tariffs on imports from Canada, Mexico, and China. These trade policy developments combined with a disappointing earnings outlook from key technology firms contributed to a negative sentiment, with the Nasdaq suffering its largest one-day drop in a month.

Looking ahead, market participants will closely monitor the upcoming monthly Personal Consumption Expenditure (PCE) data, which is the Federal Reserve's preferred inflation measure. The PCE report will provide further insight into inflationary pressures and could influence expectations for future monetary policy. With bond yields on the rise and market sentiment somewhat fragile, equities may remain under pressure, especially given high valuations in the technology sector. As investors weigh the possibility of slowing economic growth alongside geopolitical risks, volatility may persist in the near term.

Latest market and economic update

Asian equities fell sharply on Friday, with Japan and South Korea leading the declines, as local tech shares slid following Nvidia’s slump on Wall Street and ahead of the U.S. PCE inflation report. Despite this, Hong Kong’s markets saw strong gains in February, driven by optimism surrounding Chinese AI firm DeepSeek, with stocks like Alibaba and Xiaomi surging.

US equity futures stabilised overnight as investors awaited the release of the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s key inflation measure. In Europe, futures are pointing to further losses in response to the threatened 25% US tariffs, with the euro hitting two-week lows against the dollar.

European equities closed sharply lower on Thursday, with the Eurozone’s STOXX 50 down 1% and the STOXX 600 falling 0.5%, pressured by President Trump's announcement of a 25% tariff on EU imports. Auto producers like Stellantis, Mercedes Benz, and BMW led the losses, while tech equities such as ASML also dropped, and Ferrari slid following a stake sale by its parent company Exor.

The US dollar held steady around 107.3 on Friday, maintaining its recent gains as markets priced in the looming tariffs and potential rate cuts from the Federal Reserve. Against the euro, the dollar remained strong, trading at 1.0387, reflecting concerns over the US economy and inflation, with investors awaiting the release of the PCE price index.

Bitcoin continued its decline on Friday, falling to around $80,000, down 25% from its all-time highs, as concerns over President Trump's trade policies, the US economy, and uncertainty surrounding crypto regulations deepened. The downturn was compounded by a $1.5 billion hack of Ethereum and a broader selloff across risk assets.

Oil prices fell this morning, on track for their biggest monthly decline in six months, as concerns over US trade tariffs and the potential for a Russia-Ukraine peace deal outweighed worries about supply disruptions. Despite tight supply due to US sanctions on Venezuela and Iran, oil markets remain under pressure, with investors awaiting the US PCE inflation report for further clues on the Federal Reserve’s interest rate decisions.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Dell forecast a decline in its adjusted gross margin rate for fiscal year 2026 due to higher costs of building AI servers in a competitive market, while its PC business struggled with soft demand. Despite forecasting $15 billion in AI server revenue, the company’s shares fell over 1% after missing revenue estimates for Q4 and warned that potential US tariffs on Chinese goods could lead to price increases.

Monster Beverage exceeded fourth-quarter sales estimates, with net sales rising 4.7% to $1.81 billion, driven by increased demand for energy drinks and successful promotions. Despite posting a lower-than-expected adjusted profit due to impairment charges, the company’s shares rose 3% in extended trading, as it continues to expand its market presence in the energy drink category.

Duolingo reported a strong fourth-quarter performance, with revenue up 39% year-on-year to $209.6 million, driven by significant growth in user metrics and paid subscribers. Despite exceeding expectations and offering an optimistic 2025 outlook, the company's shares fell 7.4% in after-hours trading, likely due to profit-taking after a strong run in the past year.

Autodesk's shares rose over 1% in after-hours trading after reporting stronger-than-expected fourth-quarter earnings and revenue, along with an optimistic full-year forecast. The company also announced a restructuring plan involving job cuts, aiming to improve margins by reallocating resources toward cloud-based design and AI-driven technologies.

Vistra reported strong fourth-quarter core earnings at its retail unit, exceeding expectations, with net income swinging to $490 million from a loss of $184 million. Despite this, the company's shares fell in excess of 12% yesterday, partly due to a recent fire at its battery-storage plant in California, which impacted its year-to-date performance.

Snowflake Inc's shares rose 4.5% after reporting strong fourth-quarter earnings, with a 27% year-on-year revenue increase and a better-than-expected product revenue guide for fiscal 2026. The company also announced an expanded partnership with Microsoft to integrate OpenAI models into its AI services, further bolstering its growth prospects.

AXA's full-year 2024 results were broadly in line with expectations, with stronger-than-expected Property & Casualty (P&C) earnings offset by a miss in Life & Health (L&H) earnings. The company maintained solid capital metrics, reaffirmed its 6-8% EPS growth target, and announced a €1.2 billion share buyback, with a further €3.8 billion buyback expected after the completion of the AXA IM disposal in mid-2025.

Rolls-Royce raised its financial forecasts after exceeding expectations with a 16% year-on-year revenue increase, driven primarily by its Civil Aerospace division, and reported strong operating profits and free cash flow. The company also outlined optimistic guidance for 2025, including a £1 billion share buyback, signalling confidence in meeting long-term financial targets ahead of schedule.

Aviva reported stronger-than-expected 2024 profits, driven by strong growth in general insurance premiums and confirmed progress on its £3.7 billion acquisition of Direct Line. Despite challenges in its Canadian operations due to natural disasters, the insurer remains optimistic about future growth, with dividends and share buybacks set to increase in the coming years.

Meta Platforms plans to test a paid subscription service for its AI-enabled chatbot, Meta AI, in the second quarter of 2025, aiming to compete with Microsoft-backed OpenAI and Google in the AI space. CEO Mark Zuckerberg is driving the initiative as part of a broader strategy, including a $65 billion investment in AI infrastructure this year and the development of AI-powered humanoid robots through its Reality Labs division.

Tesla has applied for a transportation charter-party carrier permit in California, positioning itself to enter the ride-hailing market alongside Uber, Lyft, and Waymo. While CEO Elon Musk has hinted at launching a driverless service, initial plans may involve human drivers, with a potential rollout in Austin in June and California by year-end.

Amazon Web Services (AWS) has unveiled a prototype quantum computing chip, Ocelot, which aims to accelerate the development of a commercial quantum computer by up to five years. The chip uses "cat" qubits to improve error correction, a key challenge in quantum computing, positioning AWS alongside rivals Google and Microsoft in the race for quantum breakthroughs.

Italy's Agnelli family, through its holding company Exor, reduced its controlling stake in Ferrari by around 4%, raising €3 billion to fund potential new acquisitions and a buyback programme. Despite the sale, Exor remains Ferrari's largest shareholder with a 20% stake and 30% voting rights, reaffirming its long-term commitment to the company.

Xiaomi has set the final price for its luxury electric sedan, the SU7 Ultra, at 529,900 yuan ($72,931.72), significantly lower than the initial pre-order price of 814,900 yuan. This price reduction reflects the company's strategy to make its high-end electric vehicles more accessible as part of its expansion into the electric vehicle market.

Bank of America reiterated Applovin Corp as its top equity pick, citing strong financial performance and growth outlook, despite recent declines following a short seller report. The brokerage sees the share price drop as a buying opportunity, with a price target of $580 and expects AppLovin’s EBITDA to grow by 51% through 2026.

Upcoming data and events

Today, the Core PCE Price Index, a key inflation gauge for the Federal Reserve, will be in focus, alongside other economic data that could influence market sentiment and policy expectations. Earnings reports from major firms such as Allianz, BASF, and Amadeus will also shape market action across various sectors.

For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.