Netflix drops Warner Bros bid

General market commentary

US equities closed lower on Thursday, led by a pullback in technology names despite stronger than expected quarterly results from NVIDIA. The S&P 500 and the Nasdaq Composite both declined as the recent rally in technology shares lost momentum, with NVIDIA falling 3.6 per cent even after beating forecasts and raising guidance. The Philadelphia SE Semiconductor Index dropped 3 per cent after reaching a record high in the previous session, while Alphabet was among the larger fallers. By contrast, financials provided some support, with major banks including JPMorgan Chase, Bank of America and Wells Fargo posting gains of around 1 per cent.

Investor sentiment appeared cautious, reflecting ongoing questions about the durability of elevated artificial intelligence related capital spending. Although nearly 95 per cent of companies in the S&P 500 have reported results, with around three quarters beating estimates and earnings growth expectations rising to 11.9 per cent, markets struggled to extend gains. Bond yields eased, with the 10 year US Treasury yield at 4.01 per cent, while crude prices slipped amid higher US inventories and continued US Iran tensions. Overall, February has proved volatile for US equities, as investors reassess valuations and the longer term payoff from substantial artificial intelligence investment.

Latest market and economic update

Asian equities mostly fell on Friday, tracking weakness in US technology shares after NVIDIA declined. South Korea’s KOSPI dropped sharply but remained on course for a strong month, while Japan’s Nikkei 225 slipped and the TOPIX gained. Markets elsewhere were mixed, with Australia steady and Hong Kong modestly higher.

US equity index futures fell overnight, extending losses as technology names remained under pressure in after hours trade. Dow futures dropped 0.6 per cent, weighed by declines in Microsoft and Salesforce. Zscaler slumped nearly 10 per cent, while Netflix jumped 11 per cent after abandoning its bid for Warner Bros. Discovery.

European equities closed mixed on Thursday as strong corporate results countered technology weakness following NVIDIA earnings. The EURO STOXX 50 slipped 0.2 per cent, while the STOXX Europe 600 held near record levels. ASML and argenx fell sharply, whereas Engie and Schneider Electric advanced on upbeat updates.

The US dollar index held near 97.8 on Friday, trading sideways as investors awaited inflation data to guide Federal Reserve policy. The greenback remained firm and is set to end the month higher, snapping a three month decline. Against the euro, it stayed relatively steady, with the single currency around 1.1809.

Oil prices fell today as extended talks between the US and Iran eased fears of a Middle East conflict that might disrupt supplies, with Brent around $70.47 and WTI near $64.92 a barrel. The prospect of resumed negotiations and rising Venezuelan crude exports has softened the geopolitical risk premium, contributing to weaker prices.

The People's Bank of China moved to cool the yuan’s strength by removing the 20 per cent reserve requirement on forward dollar purchases from 2 March. The change is expected to boost demand for US dollars, as banks and firms find it cheaper to buy dollars via forwards, supporting the greenback and easing upward pressure on the yuan.

Equities on the move

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

Netflix announced it will not raise its bid for Warner Bros. Discovery after Paramount Skydance’s offer was judged superior. Netflix said matching the bid was no longer financially attractive, highlighting its healthy organic growth, $20 billion content investment plan for the year, and the resumption of its share repurchase programme to return value to shareholders.

Meta Platforms has agreed to a multi billion dollar deal to rent AI chips from Google to develop new artificial intelligence models. This complements existing agreements with Nvidia and Advanced Micro Devices, highlighting the company’s push to expand AI infrastructure and meet growing demand for advanced AI capabilities.

ASML Holding has readied its next generation High NA EUV chipmaking machines for high volume production. The $400 million tools, critical for AI chip manufacturing, have processed 500,000 wafers with limited downtime and 80 per cent uptime. Full integration will take two years, helping firms like Taiwan Semiconductor Manufacturing and Intel produce more powerful chips efficiently.

Nvidia warned that a global shortage of gaming chips could last until the end of 2026, affecting its gaming business and the wider video game industry. High demand for AI and data centre chips is prioritising memory supply, limiting availability for PCs, smartphones, and consoles, while console sales are forecast to decline about 4.4 per cent.

The global smartphone market is expected to shrink 12.9 per cent in 2026 to about 1.1 billion units due to a severe memory chip shortage driven by AI demand, according to IDC. Manufacturers are cutting specs, dropping unprofitable models, and focusing on premium devices. The crisis is unlikely to ease before mid-2027.

Anthropic PBC CEO Dario Amodei has refused government demands to remove safety limits from its Claude AI model, rejecting full military use. The company opposes mass surveillance and fully autonomous weapons, risking blacklisting and losing a $200 million contract, while warning that AI is not reliable enough without human supervision.

SanDisk is securing long-term supply agreements with data centre customers as AI drives NAND flash demand. Data centres are expected to be the largest segment by 2026, with strong growth. The firm maintains mid-to-high teens bit growth, advances BiCS8 technology, develops high-density AI flash, and extends its Kioxia joint venture through 2034.

Schneider Electric reported stronger-than-expected core earnings, driven by robust data centre demand, with quarterly revenues up 10.7% to €11.10 billion and full-year adjusted EBITA of €7.52 billion. The group expects 2026 organic growth of 7–10% and EBITA margin expansion, despite a weakening dollar and rising import tariffs affecting revenues.

Dell forecast fiscal 2027 revenue of $138 billion to $142 billion, above Wall Street estimates, driven by strong demand for AI-optimised servers. AI server revenue is expected to double to $50 billion, supported by over 4,000 customers, while memory chip costs and trade regulations have led to price increases, helping offset rising expenses.

Flutter, owner of FanDuel, forecast modest 4 per cent profit growth in 2026 to $2.97 billion, well below analyst expectations, after weaker U.S. customer engagement and misfired promotions. Shares fell over 9 per cent. The company plans loyalty programmes and increased investment in its FanDuel Predicts platform to boost user engagement.

Duolingo forecast first-quarter and 2026 bookings below expectations as it shifts focus to faster user growth. The app will expand AI features, including “Video Call with Lily,” to more users, reducing friction to paid plans. Bookings are now expected to rise 11 per cent, with adjusted profit margins falling to around 25 per cent due to increased investment in AI and marketing.

MP Materials swung to a fourth quarter profit of $9.4 million, exceeding expectations, supported by a U.S. government price agreement and magnetic material sales. The firm, which operates North America’s only rare earths mine and a Texas magnet facility, plans a second plant to produce 10,000 metric tons annually for defence and industry.

Stellantis reported a €20.1 billion net loss in H2 2025 due to writedowns from its scaled-back electric vehicle ambitions and quality issues. CEO Antonio Filosa promised a return to profitability in North America and Europe this year. The company expects mid-single-digit revenue growth, low-single-digit margins in 2026, and positive free cash flow in 2027.

Engie SA will acquire 100% of UK Power Networks for £10.5 billion, with an enterprise value of £15.8 billion. The deal, expected mid-2026, will be financed via debt, hybrid issuance, disposals, and equity, is accretive from year one, strengthens ENGIE’s regulated network position, and supports growth, credit rating, and dividends.

Nvidia CEO Jensen Huang argued that AI agents will not replace software but dramatically increase its use. Agents execute tasks within existing systems, relying on platforms like SAP, ServiceNow, and Cadence. Far from making software obsolete, AI amplifies demand, boosts productivity, and reinforces systems of record, driving a new era of enterprise software adoption.

Morgan Stanley expects hyperscaler AI investment to enter a “new era,” with capital expenditure-to-sales ratios surpassing dot-com levels. Hyperscalers could drive around 40 per cent of Russell 1000 capex, exceeding $2 trillion. Rapid spending outpaces revenue, increasing earnings sensitivity, while semiconductor suppliers benefit from roughly 60 per cent higher 2026 sales revisions.

Analysts at Capital Economics suggest strong profit growth, particularly from Nvidia and the IT sector, supports the S&P 500 for the year. Health care, industrials, and financials add further cushion. Despite AI-related software concerns, double-digit earnings growth is expected, with potential valuation expansion, projecting the S&P 500 to reach 8,000 by year-end.

HSBC has cut U.S. equity exposure and increased allocations to Europe and emerging markets, remaining tactically risk-on. The bank overweighted high-yield credit and emerging-market debt while reducing U.S. Treasurys. Machine-learning and cyclical indicators support this positioning, highlighting stronger momentum and better prospects in manufacturing-driven markets.

Upcoming data and events

Today’s key economic releases include Germany and France’s preliminary February inflation, U.S. January Producer Price Index (headline, core, and ex-food, energy and trade), Chicago PMI for February, and U.S. construction spending for December. Major Q4 earnings reports are expected from BASF, Swiss Re, Holcim, Berkshire Hathaway, and Spirit AeroSystems.

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