Nvidia forecast boosts Asian chip stocks, but global markets waver

Technology stocks, particularly in the semiconductor sector, experienced a boost on Thursday following stellar earnings and an optimistic forecast from AI leader Nvidia. The chip giant's performance alleviated some investor concerns about the sustainability of the artificial intelligence investment boom, though broader market sentiment remained cautious due to persistent inflation data from the United States.

Nvidia, now the world's most valuable company, reported second-quarter revenues that more than doubled year-over-year, exceeding analyst expectations. The company also projected continued strong performance for the current quarter. This news propelled Nvidia's shares up over 6% in pre-market trading. "The jump in the share price in pre-market trading suggests that investors have once again been wooed by Nvidia CEO Jensen Huang's unwavering optimism," noted Dan Coatsworth, head of markets at AJ Bell.

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The jump in the share price in pre-market trading suggests that investors have once again been wooed by Nvidia CEO Jensen Huang's unwavering optimism.

Asian chip manufacturers followed suit, with South Korea's SK hynix and Samsung rising 2.5% and 1.7% respectively, while Japan's Kioxia saw a 5% rally. Despite a significant rally in tech stocks over the past year, investors are increasingly focused on when the substantial capital flowing into the AI sector will yield tangible returns. Coatsworth cautioned, "Yet the more success Nvidia enjoys, the bigger the potential fall as soon as the good news machine splutters."

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Yet the more success Nvidia enjoys, the bigger the potential fall as soon as the good news machine splutters.

However, the positive impact of Nvidia's results did not fully translate across global markets. European stocks were largely down, with Paris shedding 1% and London declining, while Frankfurt edged higher. This followed mixed closing performances in Tokyo and Hong Kong. Dampening sentiment further was US data revealing that the Federal Reserve's preferred inflation gauge remained at a three-year high of 3.7% in July. "While July core PCE inflation came in line with consensus ... the details of the release were more inflationary," said Jim Reid, head of research at Deutsche Bank.

Investors are now keenly awaiting a speech by Fed chief Kevin Warsh at the Jackson Hole symposium for potential clues on interest rate policy. Despite these macroeconomic concerns, futures indicated a stronger opening for Wall Street, as investors continued to favor technology stocks. Oil prices remained stable after recent declines, with markets anticipating developments in diplomatic efforts concerning the Strait of Hormuz.

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While July core PCE inflation came in line with consensus ... the details of the release were more inflationary.