Why Did Nvidia Reverse Lower After Strong Earnings?

TL;DR

Nvidia beat earnings and topped guidance, yet the stock staged a swift midday reversal Thursday that dragged the broader market into one of its worst weeks since April. Strategists call it a healthy sentiment reset, not a fundamental change, with the S&P 500 still up nearly 12% year to date and gold up more than 50%.

Transcript

Good Friday morning. We made it from Yahoo Finance's New York City headquarters studios. I'm Yahoo Finance executive editor Brian Sazi. Where do you even begin today? You have to begin somewhere. So, I'm going to have been here. Uh Nvidia crushes its earnings report and the stock has hit with a nasty downside reversal yesterday. Keep in mind, more ... Read More

Key Insights

• Nvidia posted a strong quarter with good guidance, and more than 30 Wall Street analysts raised their price targets after the Thursday night earnings report, yet the stock still reversed sharply to the downside around midday.
• The sell-off reflects a recalibration in sentiment and expectations rather than a change in fundamentals, according to Edward Jones strategist Angelo Kourkafas, who called it an uncomfortable but healthy reset.
• The market had not seen a 5% correction in 146 days, though such pullbacks typically happen about three times a year, suggesting the current reset is overdue and normal.
• Gold has acted as a key safe haven, rising nearly 9% over the past two months and more than 50% year to date as investors sought protection amid market headwinds since April.
• Bitcoin fell well below $90,000 and is on track for its worst monthly performance since 2022, having shed about a quarter of its value in November, with total digital coin value dropping below $3 trillion.
• Crypto functions as a pure leading indicator of macro sentiment because it is the only major risk asset that trades on weekends and has no cash flow, corporate partnerships, or AI froth to boost its outlook.
• The reversal appears driven by broad market rotation rather than anything specific to Nvidia, with investors selling strength in AI names to diversify into other sectors ahead of 2026.
• New York Fed President Williams signaled the Fed could potentially cut interest rates in December, which helped drive renewed momentum across the major averages Friday morning.

Questions & Answers

Q: Why did Nvidia stock reverse lower after beating earnings?

Nvidia reported a good quarter with strong guidance and CEO Jensen Huang rocked the earnings call, and the stock initially rose about 4% following the announcement. However, around midday Thursday it staged a swift reversal to the downside. Tech editor Dan Howley said this did not appear to be anything fundamentally related to Nvidia, but rather a reaction across the broader market, which then took the same dive throughout the afternoon.

Q: How bad was the stock market week for the major indices?

It was one of the worst weeks since the April liberation day sell-off. The S&P 500 saw its worst five-day stretch since then, the NASDAQ was down about 3% on the week, and the Dow fell more than 2.5%. Despite the downward momentum, the S&P 500 remained up nearly 12% year to date and the NASDAQ was still positive at the Friday open.

Q: What is happening with Bitcoin and crypto prices?

Bitcoin sank well below the $90,000 level and is on track for its worst monthly performance since 2022, having shed about a quarter of its value in November. The total market value of digital coins fell below $3 trillion for the first time since April. Year to date, Bitcoin is down about 11.5%, reversing gains it made earlier in the year as investors took a risk-off approach.

Q: Is the current market pullback a healthy reset or a warning sign?

Edward Jones strategist Angelo Kourkafas described it as an uncomfortable but healthy reset and a recalibration in sentiment and expectations, noting nothing in the fundamentals has really changed as companies continue reporting strong results. He pointed out the market had not seen a 5% correction in 146 days, though such pullbacks typically occur about three times a year, framing the reset as providing a better setup for 2026.

Q: Why is gold rising so much in 2026?

Gold has served as a key safe haven asset, especially since April, as investors digested market headwinds and sought protection. It has seen strong momentum over the past two months alone, rising nearly 9% in that span, and is up more than 50% year to date. Investors sought out gold as a safe haven during periods of market uncertainty and risk-off sentiment.

Q: When should investors start buying during this pullback?

Angelo Kourkafas suggested that once the pullback reaches a magnitude between 5 and 10%, it becomes a good point for investors to start pulling out their shopping lists. He noted the market is about to enter a more seasonally favorable period heading into Thanksgiving and Black Friday, making it a good time for investors to build a list of potential investments to deploy new capital in for 2026.

Q: What did Jensen Huang say about the AI bubble concerns?

Jensen Huang, along with CFO Colette Kress, pushed back against the idea of an AI bubble, saying there is plenty of room for growth and that companies are still using Nvidia's older chips. Huang directly addressed the circular investing thesis, the idea that Nvidia invests in companies that then buy its chips. He also countered a Michael Burry claim that companies like Meta and Oracle artificially raise revenue by pushing aside chip depreciation.

Q: Could the Fed cut interest rates in December?

New York Fed President Williams said Friday morning that the Fed could potentially cut rates in December. This signal drove increased momentum across the major averages heading into the last trading session of the week. Rate cut expectations remain a key sensitivity for markets, and strategist Angelo Kourkafas noted that upcoming catalysts will largely depend on what the Fed delivers, with a lot of sensitivity around those rate cut expectations.

Summary & Key Takeaways

• Nvidia crushed its earnings report with strong results and guidance, and Jensen Huang pushed back against AI bubble fears, but the stock staged a swift midday reversal Thursday that pressured the broader market and extended selling into Friday.

• Despite the rough week, the S&P 500 remains up nearly 12% year to date. The past five days marked one of the worst weeks since April's liberation day, with the NASDAQ down about 3% and the Dow down more than 2.5% on the week.

• Strategists frame the pullback as a healthy sentiment reset, not a fundamental shift, and see the 5-10% magnitude as a good point for investors to prepare shopping lists heading into a seasonally favorable period and 2026.