Wall Street sank on Thursday, with Nvidia slipping despite strong quarterly results and dragging down other chip stocks. Investors were also keeping an eye on a fresh round of nuclear talks between the U.S. and Iran.
At 14:13 ET (19:13 GMT), the benchmark S&P 500 index was down 0.6% to 6,902.54 points, and the tech-heavy NASDAQ Composite slipped 1.3% to 22,848.08 points. The blue-chip Dow Jones Industrial Average had clawed back some losses and was last flat at 49,478.12 points.
The main averages rose in the prior session, with sentiment more upbeat over the outlook for AI, in the latest twist of what has been a roller-coaster narrative around the nascent technology.
Nvidia’s lack of returns overshadows results
Nvidia (NASDAQ:NVDA) reported higher-than-expected revenue and profit for the three months to end-January, and the chip maker also forecast stronger-than-expected revenue for the current quarter, as it continued to benefit from outsized AI-fueled demand for its advanced chips.
“The results in the marketplace, whether it be from Nvidia and other chip manufacturers, or the
continuing investments from Alphabet (NASDAQ:GOOGL) and Meta (NASDAQ:META), all underscore the same fundamental truth: AI factory and computing demand is continuing to grow exponentially,” Matt Langman, SVP and GM of infrastructure solutions at Phononic, say. Phononic is a U.S.-based company that provides cooling solutions for data centers.
“From our perspective, we applaud and are energized by this continued momentum in the data center space, and particularly the push to maximize performance, optimize energy utilization and capitalize on the vast potential of AI infrastructure globally,” Langman added.
That said, investors flagged worries that the semiconductor titan was not returning enough to shareholders. Yvette Schmitter, CEO of IT consulting firm Fusion Collective, noted that Nvidia generated $35 billion in cash during the fourth quarter, but gave back only 12%, down from 52% this time last year.
Schmitter added that “this is happening at the same time Nvidia is claiming” that its sold-out Ampere chips are a “good signal for demand.”
Shares of Nvidia shed nearly 5%, dragging with it other chip giants such as Broadcom (NASDAQ:AVGO) and ASML (AS:ASML).
“Markets aren’t about good or bad news in isolation; they’re about how results compare with expectations. Nvidia is still up more than 1,400% from its October 2022 low, so the bar for positive surprises remains high,” Keith Lerner, chief investment officer and chief market strategist at Truist, say.
“Conversely, software stocks are rebounding after significant underperformance, where expectations had become very depressed. As a result, part of today’s action reflects simple rotation,” Lerner added.
Software names such as Atlassian (NASDAQ:TEAM) and Workday (NASDAQ:WDAY) were among the top percentage gainers on the Nasdaq.
“As it pertains to Nvidia, the issue is the same as it is for any high-flying security or sector that is priced for ’perfection’. If the environment has to be perfect and the expectation is to always significantly beat expectations, the probability of disappointment is much greater than otherwise,” Oliver Pursche, senior vice president at Wealthspire Advisors, say.
In other earnings-related moves, Salesforce (NYSE:CRM) shares reversed a premarket decline to push higher. The cloud-based software company unveiled a fiscal 2027 revenue forecast which was short of Wall Street estimates, a sign that demand for business-facing software may be taking a hit as more companies rein in budgets during a time of broad economic uncertainty.
U.S. and Iran end nuclear talks
Elsewhere, U.S. and Iranian negotiators ended a third round of talks in Geneva about Iran’s nuclear activity.
Mediator Oman said the talks had ended with “significant progress” and that discussions will resume after “consultation in the respective capitals.”
President Donald Trump has said that “bad things” could happen if meaningful progress is not achieved, and the U.S. has built up one of its biggest military deployments in the Middle East.
An extended conflict could disrupt supplies from Iran, the third-biggest crude producer in the Organization of the Petroleum Exporting Countries.
Oil prices were largely higher, hovering near seven-month highs.
Brent futures were up 0.4% to $70.96 a barrel, while U.S. West Texas Intermediate crude futures were down 0.1% to $65.38 a barrel.
Source : investing.com