Nvidia`s results to test strength of AI boom

General market commentary

Equity markets closed lower on Tuesday as investors exercised caution ahead of Nvidia’s highly anticipated earnings report, widely viewed as a bellwether for the technology sector. Selling pressure was concentrated in the consumer discretionary and technology sectors, with high profile names such as Microsoft and Amazon.com falling amid European Commission investigations into their cloud services. The Nasdaq Composite dropped 1.2 per cent, the S&P 500 slipped 0.8 per cent, and the Dow Jones Industrial Average fell 1.1 per cent. Investor nervousness was evident in derivatives markets, where demand for options offering downside protection surged, and the VIX volatility index jumped to 24.69, its highest level since mid October, signalling expectations of increased near term swings in equity prices.

The market decline was broad based, though high growth and richly valued technology shares were the weakest performers. Consumer discretionary equities also lagged as investors reduced exposure to companies sensitive to changes in spending and financing conditions. By contrast, defensive sectors such as utilities and consumer staples held up relatively better, reflecting a cautious positioning strategy. Overall, Tuesday’s session highlighted a risk off sentiment, with investors seeking to manage potential volatility while awaiting key corporate results. The focus on Nvidia’s earnings, alongside rising concerns over valuations and margins in the technology sector, contributed to selective selling and a measured tone across the equity market.

Latest market and economic update

Asian equities edged higher on Wednesday, recovering from recent losses, though technology shares remained fragile ahead of Nvidia’s earnings report. Japan’s Nikkei rose 0.6%, South Korea’s KOSPI 0.2%, and Hong Kong’s Hang Seng was steady. China’s CSI 300 and Shanghai Composite gained modestly. Xiaomi fell on rising costs, while Baidu rose on AI-driven growth momentum.

US equity futures steadied overnight ahead of Nvidia’s earnings, as investors monitored AI sector risks, high valuations, and consumer trends from major retailers including TJX, Lowe’s, and Target. After four consecutive losses, the Dow and S&P 500 fell over 1% on Tuesday, while the tech-heavy Nasdaq dropped 1.21%, pressured by declines in Nvidia, Microsoft, AMD, Palantir, and Micron.

European shares fell sharply on Tuesday, with the STOXX 600 down 1.8% to a one-month low and Germany’s DAX near a five-month trough, as investor anxiety over overvalued tech shares and fading expectations of a U.S. rate cut gripped markets. Losses hit banks, autos, miners, and AI-related equities, while Roche gained on positive breast cancer drug data.

The U.S. dollar held steady against major peers in early Asian trading on Wednesday, supported by demand for safe-haven assets amid a global equity selloff. The dollar index was flat at 99.594, near a one-week high, while the euro traded around $1.1580, little changed but remaining close to a one-week low of $1.1572 amid ongoing market uncertainty.

Oil prices dipped in Asian trade this morning as rising U.S. crude inventories tempered earlier gains. Brent fell 0.4% to $64.61 and WTI 0.4% to $60.51 per barrel. Markets await U.S. EIA data and the impact of upcoming U.S. sanctions on Russian oil firms. Supply concerns from Russian sanctions and Ukrainian attacks continue to influence prices.

The Trump administration has been quietly working with Russia on a 28-point plan to end the war in Ukraine, Axios reported. Led by U.S. Middle East envoy Steve Witkoff, the plan focuses on peace in Ukraine, European security, and future U.S.-Russia relations. Discussions also involved Ukraine, though contentious issues like territory and NATO membership remain unresolved.

Equities on the move

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

Cloudflare experienced a major service outage on Tuesday, disrupting access to key platforms including OpenAI’s ChatGPT and Elon Musk’s X. The issue, caused by a spike in unusual traffic, highlighted Cloudflare’s critical role in global digital infrastructure, managing and securing traffic for roughly 20% of the web, as engineers worked to resolve the problem.

Baidu shares rose today as investors focused on growth in the company’s AI businesses despite a quarterly loss. Third-quarter revenue fell 7% to RMB31.2 billion, with online marketing down 18%. The company posted a net loss of RMB11.2 billion, largely due to asset impairments, while AI-powered revenue grew over 50% to around RMB10 billion.

Home Depot missed quarterly profit estimates as tariff pressures, rising costs, and a slow housing market weighed on demand for big-ticket renovations. Third-quarter comparable sales were flat, with transactions down 1.6%, though overall sales of $41.35 billion beat forecasts. The company now expects full-year adjusted earnings per share to fall 5%, down from a prior 2% decline target.

Freeport-McMoRan plans to resume production at Indonesia’s Grasberg copper and gold mine by July following a fatal mud flooding in September that killed seven workers. The company expects 2026 output to match 2025 levels, with longer-term production rising through 2027-2029. Grasberg remains a key asset amid rising global copper and gold demand.

The European Commission has launched three investigations into Amazon and Microsoft’s cloud services under the Digital Markets Act, assessing gatekeeper status and anticompetitive practices. If designated, the firms must ensure interoperability and avoid favouring their services, facing fines of up to 10% of global turnover. Probes are expected to conclude within 12 months.

Activist investor Elliott Investment Management has taken a significant stake in Barrick Mining, making it one of the company’s 10 largest shareholders, valued at around $700 million. Barrick, facing a $1 billion Mali write-off and CEO Mark Bristow’s departure, is reportedly considering splitting into separate North American and African-Asian businesses.

Kering aims to return to growth by reducing reliance on Gucci, downsizing its store network, and boosting other brands like Saint Laurent, Bottega Veneta, and Balenciaga, CEO Luca de Meo said. The group plans an 18-month timeline to revive all brands and three years to restore top financial performance, following the sale of its beauty division.

Crédit Agricole unveiled medium-term targets through 2028, aiming for net profit above €8.5 billion and return on tangible equity over 14%, surpassing market expectations. Revenue is forecast to exceed €30 billion, with a cost-to-income ratio below 55%. Divisional income is set to rise across French and international retail, specialised services, and corporate banking.

Roche’s lidERA trial for giredestrant in early-stage, estrogen receptor–positive breast cancer showed promising early results, the first for this type of drug in this setting. The trial demonstrated clear benefits with no unexpected safety issues, reinforcing Roche’s position in early breast cancer treatment and supporting confidence in upcoming studies.

Chinese robotaxi operator Pony Ai announced a new generation of autonomous trucks designed for mass production and longer life. The fourth-generation vehicles, set for initial deployment in 2026, are built to operate up to 1 million kilometres or 20,000 hours. Pony Ai, a leading robotaxi firm, operates around 200 trucks, primarily in China, and is expanding internationally.

Stellantis announced it will adopt Tesla’s North American Charging System for select battery-electric vehicles from 2026, providing access to over 28,000 Superchargers in North America, Japan, and South Korea. Initial integration will cover models like the Jeep Wagoneer S and Dodge Charger Daytona, with the 2026 Jeep Recon following. Access in Asia begins in 2027.

Kering aims to return to growth by reducing reliance on Gucci, downsizing its store network, and boosting other brands like Saint Laurent, Bottega Veneta, and Balenciaga, CEO Luca de Meo said. The group plans an 18-month timeline to revive all brands and three years to restore top financial performance, following the sale of its beauty division.

Rothschild has downgraded Microsoft and Amazon to Neutral, citing that GenAI investments no longer justify hyperscaler valuations. Analyst Alex Haissl notes heavy capital spending, low returns, and value shifting to AI model providers, reducing traditional leverage. While growth remains solid, the economics diverge from cloud 1.0, prompting a more cautious outlook.

Loop Capital upgraded Alphabet to Buy from Hold, citing diminished investor concerns over AI disruption to search and strong momentum in Google Cloud. The firm raised its price target to $320, highlighting growth in search traffic, AI features like Gemini, and opportunities for proprietary AI chips, reflecting broad confidence in Alphabet’s AI-driven upside.

MoffettNathanson warned that Meta may face prolonged margin pressure as rising AI investment accelerates, cutting its price target to $750. Despite strong revenue growth, costs for building a “Meta AI Superintelligence” could compress Q4 and 2026 margins. Analyst Michael Nathanson expects operating margins to remain under pressure for the next two years.

Stifel upgraded Deckers Outdoor to Buy from Hold, citing attractive valuation, HOKA’s momentum, and a strong balance sheet. The firm highlighted an 11.7x P/E on fiscal 2027 estimates, $2 billion net cash, zero debt, and a $2.2 billion share repurchase plan. Growth drivers include HOKA expansion, UGG pricing opportunities, and distribution gains, supporting low-double-digit EPS growth.

Berenberg initiated coverage on US cybersecurity firms, highlighting steady growth, high revenue visibility, and rising IT budget share. It issued Buy ratings for Okta, SentinelOne, and Zscaler, with Hold on CrowdStrike. Analysts cited structural demand from cloud adoption, data growth, AI threats, and potential for expanding margins across the sector.

Upcoming data and events

Markets face a busy session ahead with the Fed’s FOMC minutes, U.S. crude inventories, building permits, and earnings from Nvidia, Target, TJX, Lowe’s, and Palo Alto Networks, offering key insights into monetary policy, energy, housing, and sector trends ahead of Thanksgiving.

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