Nvidia provides little steer for tech shares

General market commentary

US equities closed mixed on Wednesday, with the Nasdaq and S&P 500 posting modest gains, while the Dow Jones saw a slight decline. Investors remained cautious amid mixed economic data, including a dip in new home sales and a decline in mortgage applications, though corporate earnings provided some relief. Notably, the technology sector continued to lead, driven by expectations for strong results from AI giant Nvidia, despite broader concerns about economic growth and tightening Fed policies. Treasury yields edged lower, reflecting market expectations for potential rate cuts later this year, as investors weighed the likelihood of economic slowdowns and more volatility in the months ahead.

The market has also seen notable rotations in recent weeks, with value and cyclical sectors, such as energy and healthcare, outperforming the mega-cap technology names. This shift has been driven by investor focus on more attractive valuations and areas of earnings growth, particularly in international markets, which have outperformed US equities. Despite the recent pullbacks, these are seen as normal market corrections, with volatility expected to rise after two years of strong performance and low fluctuations. As the market matures, investors are encouraged to embrace diversification, positioning themselves for long-term opportunities while maintaining balanced exposure across sectors and regions.

Latest market and economic update

Asian equities mostly edged lower on Thursday, with technology shares retreating following Nvidia's post-earnings decline, and Hong Kong's Hang Seng index slipping from a three-year high due to profit-taking. Mainland Chinese shares also saw modest losses, while Australia's ASX 200 and Japan's TOPIX posted small gains, supported by positive earnings reports.

US equity futures were largely unchanged overnight as investors processed Nvidia’s earnings report, which showed a 78% year-on-year revenue increase driven by strong demand for its GPUs. Meanwhile, Salesforce saw a significant drop of over 5% following disappointing results, while market sentiment was also affected by President Trump’s announcement of new tariffs on European autos and delayed tariffs on Mexico and Canada.

European equities closed at a record high on Wednesday, with the STOXX 600 rising 1%, led by gains in banks and insurers, while upbeat results from Wienerberger boosted the construction sector. Notable movements included Anheuser-Busch InBev's 8.9% jump, Wolters Kluwer’s 10.9% drop, and Stellantis falling 4.1%, while optimism around pro-growth policies and higher defence spending lifted Germany's mid-cap equities.

The US dollar strengthened on Thursday, rising to around 106.6 on the dollar index, as President Trump’s tariff announcements fuelled market caution. The euro traded lower at 1.0464 against the dollar, with concerns over further tariffs and expectations of Fed rate cuts weighing on investor sentiment.

Oil prices edged up this morning, recovering slightly from a two-month low as investors weighed fresh tariff threats from President Trump and a mixed U.S. inventory report. While a draw in crude oil stocks provided some support, concerns over increased refined product stocks and geopolitical tensions kept the market cautious.

Equities on the move

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

Nvidia reported stronger-than-expected Q4 results, with adjusted earnings per share of $0.89 and revenue of $39.3 billion, up 78% year-on-year, and forecasted Q1 revenue of $43 billion. The company expressed optimism about demand for its next-generation Blackwell AI chips, despite concerns over rising competition from Chinese AI firms, with CEO Jensen Huang highlighting that post-training AI models are driving increased demand.

Salesforce forecasted fiscal 2026 revenue below Wall Street expectations, citing slower adoption of its Agentforce platform, which sent shares down around 5% in after-hours trading. The company’s downbeat outlook reflects a pressured spending environment, with enterprises cautious amid high interest rates and economic uncertainty, and the success of Agentforce now seen as key to returning to double-digit growth.

CRH forecasted core profit growth of 6% to 12% for 2025, following a 12% increase in 2024 driven by strong infrastructure and non-residential activity. The company, benefiting from increased U.S. public capital spending and global reshoring trends, expects its full-year adjusted EBITDA to rise to between $7.3 billion and $7.7 billion, up from $6.9 billion in 2024.

Snowflake shares surged 9% in after-hours trading following a strong fourth-quarter earnings report that exceeded analyst expectations and a new partnership with Microsoft to integrate OpenAI models. The company posted adjusted earnings per share of $0.30, revenue of $986.8 million, and a 28% year-on-year increase in product revenue, while also forecasting 21-22% year-on-year growth in product revenue for the first quarter.

eBay shares fell 8.5% in after-hours trading after the company issued weaker-than-expected first-quarter revenue guidance, despite reporting better-than-anticipated fourth-quarter earnings. The e-commerce giant posted adjusted earnings per share of $1.25 and a slight revenue increase of 1% year-on-year, but its Q1 2025 revenue forecast of $2.52 billion to $2.56 billion disappointed investors.

Lowe’s reported unexpected fourth-quarter growth in comparable sales, rising by 0.2%, surpassing expectations of a 1.82% decline, thanks to its strategy targeting both retail and professional customers. However, for the 2025 fiscal year, the company forecast flat to modest growth in sales and slightly lower-than-expected earnings per share, citing near-term uncertainty in the home improvement market.

Anheuser-Busch InBev’s shares rose over 8% after reporting stronger-than-expected fourth-quarter earnings, with a 10.1% increase in EBITDA and full-year earnings of $3.53 per share. Despite challenges in China, strong performances in South America and EMEA boosted revenue, while cost controls improved its balance sheet and enabled a higher-than-expected dividend.

Deutsche Telekom's shares fell over 3% following weaker-than-expected fourth-quarter results, with challenges in Germany’s fixed-service revenue and revised U.S. guidance weighing on investor sentiment. Despite this, UBS maintained a positive long-term outlook, forecasting steady earnings growth and highlighting the company’s strong position in the U.S. and Germany.

Stellantis issued a cautious outlook for 2025, warning that its revenue growth and positive cash generation would not materialise until the second half of the year, following a tough 2024 that included a slump in its U.S. business and the ousting of CEO Carlos Tavares. Shares dropped 5.2% as the company projected a modest margin and cash flow breakeven for the first half, amid high costs, sluggish demand, and competitive pressure from China.

General Motors announced a 25% increase in its quarterly dividend and a new $6-billion share buyback programme, boosting investor confidence and sending shares up by 3.4%. The company plans to repurchase $2 billion of shares by mid-2025, while continuing to balance shareholder returns with investment in its electric vehicle business, which is expected to reduce operating losses this year.

BP has announced a shift in strategy, cutting planned investments in renewable energy while increasing its oil and gas spending to $10 billion annually, aiming to boost earnings and shareholder returns. The company plans to raise its dividend by at least 4% and reduce its asset sales target to $20 billion by 2027, though the move caused its shares to fall over 1% in London trading.

Danone reported strong sales in 2024, with a 4.7% organic sales growth in Q4, driven by solid performances in North America and China, although weaker pricing in Europe slightly dampened overall results. The company exceeded cash flow expectations and maintained its FY25 guidance, but investor enthusiasm was tempered by stagnant performance in Europe and no upside surprise in margins.

Munich Re expects a €1.2 billion hit from the recent Los Angeles wildfires, though analysts believe the claims are manageable within the company's loss absorption capacity. Despite the setback, the insurer reported strong Q4 results, with a 17.1% operating profit beat, and remains confident in its long-term financial stability, bolstered by strong capital reserves and a solid dividend increase.

Eli Lilly announced plans to invest an additional $27 billion in U.S. pharmaceutical manufacturing, bringing its total domestic investment since 2020 to over $50 billion. The company will build four new sites, creating over 13,000 jobs, with a focus on active pharmaceutical ingredient production and injectable therapies, while emphasising the importance of tax policies for continued growth.

Shares of power and electrical equipment companies surged after reports emerged that Meta Platforms is considering a $200 billion data centre campus for AI projects, driving demand for power infrastructure. Companies like NANO Nuclear Energy, Oklo, and Vistra saw significant gains, reflecting the growing competition in AI development and the expected rise in power requirements for such massive tech expansions.

AppLovin's shares fell over 12% after short sellers accused the company of advertising fraud and unethical practices, including exploiting app permissions and rigging its e-commerce initiatives. CEO Adam Foroughi defended the company, calling the claims inaccurate and aimed at manipulating the stock price, while reaffirming their adherence to App Store policies and commitment to transparency and data privacy.

The European Central Bank is set to approve UniCredit's purchase of a 29.9% stake in Commerzbank, potentially paving the way for Europe's largest cross-border banking deal since the financial crisis. UniCredit's CEO, Andrea Orcel, has pushed for a full takeover despite opposition from Commerzbank’s management and German politicians, with the deal contingent on regulatory approval and government support.

Summit Insights downgraded Nvidia to "Hold" from "Buy," citing concerns over a less favourable risk-reward scenario despite the company's strong earnings and positive outlook. The downgrade reflects worries about a potential slowdown in Nvidia's growth due to margin contraction, lower computing demands from more efficient AI models, and increased competition from emerging technologies like China's DeepSeek AI.

Bernstein upgraded Alibaba to Outperform from Market-Perform, raising its price target to $165, citing optimism around AI-driven growth in Alicloud and improved capital allocation. The firm believes Alibaba's shift towards AI infrastructure and its stronger domestic e-commerce performance will drive revenue acceleration, particularly in the March and June quarters.

Upcoming data and events

Thursday's economic data includes key reports on GDP, initial jobless claims, durable goods orders, and pending home sales, all of which could impact market sentiment and Federal Reserve policy decisions. On the earnings front, major companies like Axa, Dell, Monster Beverage, and Vistra Corp. are set to report, offering insight into their financial performance and potential market movements.

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