Nvidia's Stellar Earnings Reassure Investors and Fuel Global AI Stock Surge

Global tech stocks rally on Thursday as Nvidia's robust earnings report eases concerns about an AI bubble. The chipmaker's revenue jumps 62% year-on-year, surpassing expectations and driving a 5% premarket share price increase.

Market Reaction to Nvidia's Earnings

Investors are pouring back into AI-related stocks, buoyed by Nvidia's strong financial performance. In Europe, Dutch semiconductor firms BESI and ASMI see gains of over 3% and 2%, respectively, in early trading. ASML, a key player in semiconductor equipment, also climbs 2.1%.

In Asia, Samsung Electronics and Hon Hai Precision Industry, known as Foxconn, rise 3.5% and 3.3%. U.S. tech stocks also benefit, with AMD up 5%, Arm gaining nearly 4%, and Micron Technology advancing 2.7% in premarket trade.

Analysts' Take on Nvidia's Growth

Dan Hanbury, global equity portfolio manager at Ninety One, highlights the 'phenomenal growth' Nvidia is delivering. 'Our reading of the numbers is they are very strong. Only three years ago, they were delivering $15 billion of data center revenue; now, we're looking at consensus forecasts of $280 billion for next year,' he tells CNBC's 'Squawk Box Europe.'

However, Karen McCormick, chief investment officer at Beringea, expresses some caution. 'It's more than we have seen in the past. If we are in a bubble and if any of that bubble bursts, what is going to happen to all of the related businesses?' she asks, noting the intertwined nature of the AI ecosystem.

Valuation and Market Sentiment

Ben Barringer, Quilter Cheviot's global head of technology research, downplays concerns about stretched valuations. 'Nvidia's valuation isn't particularly excessive. Valuations aren't that stretched when you look at the core big tech companies,' he says, adding that many of these companies have robust balance sheets and investor support.

Despite the recent surge, the market remains cautious. The circular dealmaking, debt issuances, and high valuations add pressure, but the overall sentiment is positive, driven by Nvidia's stellar results and the broader tech sector's solid quarterly earnings.

References

• Global tech stocks climb as Nvidia results spark relief rally soothing AI bubble concerns