How Nvidia Earnings Revived the AI Stock Rally

TL;DR

Nvidia’s stronger-than-expected results and upbeat sales outlook restored confidence in AI-related stocks after two weeks of selling. Demand for Blackwell chips remained supply constrained, while uncertainty over China sales, Federal Reserve policy, delayed labor data, and the profitability of broader AI investment could limit how long the market rally lasts.

Transcript

SHERY: THIS IS "THE ASIA TRADE" LIVE FROM THE BLOOMBERG NEW ECONOMY FOR ENSURING -- IN SINGAPORE. AVRIL: COUNTERING FEARS THAT AN EXPLOSION AND AI SPENDING IS HEADING FOR A CRASH. SHARES JUMPING IN LATE TRADE. WE WILL SPEAK EXCLUSIVELY WITH CEO JENSEN HUANG. SHERY: NVIDIA'S RESULTS SENT TO BOOST SENTIMENT IN ASIA EVEN AS TRADERS ALMOST CRIES OUT A ... Read More

Key Insights

• Nvidia’s earnings exceeded Wall Street projections and triggered a sharp after-hours rise following two weeks of selling in AI-related stocks. The favorable results lowered immediate concern about an AI spending crash and lifted other large technology shares alongside Nvidia.
• Nvidia’s fiscal fourth-quarter outlook excluded sales to China, leaving that market as a major uncertainty. The company had received approvals for some H20 sales during the preceding quarter, but management said there was no customer interest and no agreement covering more competitive data-center products.
• Nvidia’s longer-term opportunity included a previously discussed $500 billion sales trajectory through the end of calendar 2026. The earnings discussion suggested that figure could increase as enterprise software companies, AI laboratories, and other partners continued reporting demand and revenue linked to artificial intelligence investment.
• Blackwell demand was described as sold out, making supply availability a potential constraint on Nvidia’s growth. The central investor question was how the company could raise its long-term sales outlook while lacking enough current product supply to satisfy all available demand.
• Middle Eastern demand represented possible additional upside after the U.S. Commerce Department approved sales of Nvidia chips connected to a Saudi Arabian artificial intelligence initiative. The discussion raised the question of whether Nvidia’s existing forecasts already included that revenue or left room for further growth.
• AI project financing remained a source of bubble concern because capital can move among chip suppliers, hyperscalers, and artificial intelligence laboratories. Nvidia argued that its investments do not necessarily require recipients to purchase Nvidia hardware, although its arrangement with Anthropic included both investment and Nvidia GPU purchases.
• Alphabet’s Gemini 3 model strengthened confidence in its competitive position after favorable analyst reviews. The company described the model as a significant advance in reasoning and coding, while Alphabet’s shares had risen 57 percent during the year, making it the best-performing member of the Magnificent Seven.
• Federal Reserve uncertainty threatened the durability of the technology rally because traders were pricing out a December rate cut. Delayed and missing employment reports left policymakers with limited current evidence, while higher expected rates supported the dollar, weakened regional currencies, and created another potential drag on technology stocks.

Questions & Answers

Q: Why did Nvidia earnings revive AI stock sentiment?

Nvidia exceeded Wall Street projections and provided an upbeat fiscal fourth-quarter sales outlook, prompting a sharp rise in after-hours trading. The reaction followed two weeks of selling in AI-related stocks, so expectations had already weakened. Management also rejected the idea that artificial intelligence was in a bubble, described Blackwell products as sold out, and indicated that its longer-term sales trajectory could expand.

Q: What did Nvidia say about its future sales outlook?

Nvidia discussed a previously provided $500 billion sales trajectory through the end of calendar 2026 and suggested that the total could grow. Management pointed to demand across enterprise software companies and artificial intelligence laboratories, arguing that customers were generating revenue from their investments. The fiscal fourth-quarter forecast also did not assume China sales, leaving possible growth dependent on other markets and available supply.

Q: Why was China excluded from Nvidia's forecast?

Nvidia’s fiscal fourth-quarter outlook did not assume any sales to China because access to that market remained uncertain. The company said it had received approvals to sell some H20 products during the previous quarter, but there was no customer interest. It also lacked agreements with either the U.S. or Chinese government for sales of what it called more competitive generations of data-center computing products.

Q: How could the Middle East contribute to Nvidia's growth?

The Middle East could provide additional demand after the U.S. Commerce Department approved sales of Nvidia chips connected to a Saudi Arabian artificial intelligence initiative. The program involved an umbrella organization administering relationships among the United States, GPU providers, and Saudi Arabia. The potential upside depended on whether Nvidia’s existing forecast already incorporated that expected revenue or treated it as an opportunity beyond current guidance.

Q: Why are Nvidia's Blackwell supply constraints important?

Nvidia said it was sold out of the Blackwell generation, indicating that customer demand exceeded currently available supply. That creates a practical limit on how quickly the company can convert demand into recognized sales. Investors therefore needed to reconcile two statements: Blackwell products were supply constrained, while Nvidia’s previously discussed $500 billion sales trajectory through calendar 2026 could still increase.

Q: Why do Nvidia's AI investments raise bubble concerns?

Some investors worried that money circulating among Nvidia, hyperscalers, and artificial intelligence laboratories could make demand appear stronger than it was. Nvidia said funding an AI laboratory did not require that recipient to purchase Nvidia GPUs and could even support competing hardware. However, the Nvidia and Anthropic relationship attracted attention because Nvidia invested heavily while Anthropic also purchased Nvidia GPUs, reinforcing concerns about interconnected financing.

Q: How did Alphabet's Gemini 3 affect technology stocks?

Alphabet shares gained after analysts responded favorably to Gemini 3, strengthening confidence in the company’s position within artificial intelligence. Alphabet described the model as a major advance in reasoning and coding ability. The favorable reception contrasted with the weaker response to GPT-5 earlier in the year, and Alphabet’s 57 percent annual share gain made it the strongest performer among the Magnificent Seven.

Q: What could weaken the Nvidia-led market rally?

The rally could weaken if interest-rate expectations, currency moves, or doubts about AI profitability outweigh enthusiasm over Nvidia’s results. Traders were reducing expectations for a December Federal Reserve rate cut, while delayed employment data made the policy outlook harder to judge. Higher expected U.S. rates supported the dollar, weakened currencies such as the yen, and created an additional headwind for technology shares and regional markets.

Summary & Key Takeaways

• Nvidia exceeded Wall Street projections and issued an upbeat fiscal fourth-quarter sales outlook that excluded China sales. Management said Blackwell products were sold out and suggested its previously discussed $500 billion sales trajectory through the end of calendar 2026 could grow, supporting a broad rebound in AI-related stocks.

• The rally spread across major technology companies and Asian markets, with semiconductor-heavy indexes receiving particular support. Alphabet also gained after favorable analyst reactions to Gemini 3, which the company described as a major improvement in reasoning and coding, reinforcing investor confidence in the commercial development of artificial intelligence.

• Important risks remained beneath the positive market reaction. Traders reduced expectations for a December Federal Reserve rate cut, delayed labor reports complicated policy analysis, and a stronger dollar pressured regional currencies. Investors also continued questioning AI project financing, circular commercial relationships, supply constraints, geopolitical fragmentation, and the eventual profitability of data-center spending.