In this photo illustration, the Nvidia logo appears on a smartphone screen and in the background.
Rafael Henrique | SOPA images | Light rocket | Getty Images
This report is from today’s CNBC Daily Open, our new newsletter for international markets. CNBC Daily Open updates investors with everything they need to know, wherever they are. Do you like what you see? You can subscribe here.
Nvidia is rising, the results are above expectations
Nvidia shares rose more than 7% to top $1,000 for the first time in extended trading after first-quarter earnings and sales beat analysts’ expectations. The chipmaker expects second-quarter revenue of $28 billion, compared with estimates of $26.6 billion. The company plans to split its shares 10 for 1.
Wall Street is sinking due to inflation fears
The Dow Jones Industrial Average fell more than 200 points, marking its worst day yet this month, as minutes from the Federal Reserve’s latest meeting fueled concerns about persistent inflation. The S&P 500 and the Nasdaq Composite also lost ground. Government bond yields rose slowly as the prospect of rate cuts was pushed further out. Oil prices fell for the third day in a row ahead of an OPEC meeting.
Worries about Fed inflation
The minutes of the Federal Reserve’s latest interest rate meeting showed the central bank was concerned about the “lack of progress” in bringing inflation closer to the 2% target. The minutes also showed that “several participants mentioned a willingness to tighten policy further if risks to inflation materialized in a way that would make such action appropriate.” Fed policymakers kept interest rates within a range of 5.25%-5.5%.
Dimon: US could see ‘hard landing’
Jamie Dimon, CEO of JPMorgan Chase, said the US economy could experience a “hard landing” and the worst outcome could be “stagflation.” When asked by CNBC’s Sri Jegarajah about the prospect of a hard landing, Dimon responded, “Could we actually see one? Of course, how can anyone who reads history say there’s no chance?”
Asia Pacific markets were mixed
Hong Kong’s Hang Seng led losses as data center operator GDS Holdings posted a net loss. Shares fell 12%. Mainland China’s CSI 300 index fell 0.9%. Japan’s Nikkei 225 rose 1.1% as manufacturing activity grew for the first time in a year and the services sector continued to expand in May. South Korea’s Kospi rose 0.3% after the central bank kept interest rates at 3.5%, as expected. Australia’s S&P/ASX 200 fell 0.4% as business activity grew at the slowest pace in three months.
[PRO] AI plays under the radar
Hedge funds are taking advantage of these lesser-known beneficiaries of the artificial intelligence boom as they scale back their exposure to megacaps, according to Goldman Sachs. The Wall Street investment bank analyzed the holdings of 707 hedge funds with $2.7 trillion in gross equity positions at the start of the second quarter.
There were two major announcements after markets closed on Wednesday. Prime Minister Rishi Sunak of the United Kingdom, the world’s sixth-largest economy with a GDP of about $3 trillion, called a general election, which had little impact on the market. The pound was largely unchanged. The second was from Nvidia, a 31-year-old graphics chip company valued at $2.3 trillion, which delivered its long-awaited profits and saw its shares soar to record highs..
There were expectations of a $200 billion swing in the company’s stock depending on the earnings outcome. The share rose more than 7% in after-hours trading. Nvidia shares are up 92% this year and 200% in the past twelve months. Nvidia is powering the artificial intelligence revolution, with Google, Amazon, Meta and Microsoft spending an estimated $200 billion buying their AI chips.
“The next industrial revolution has begun,” CEO Jensen Huang said in a statement. “We are ready for our next wave of growth.”
Dan Niles, founder of Niles Investment Management, compared Nvidia to Cisco in the 1990s. Cisco was the go-to company for Internet equipment. From 1994 to its peak in 2000, Cisco shares rose 4,000%. Niles believes Nvidia will go through a similar cycle.
“We are still very early in AI development,” Niles told CNBC’s “Money Matters” on Monday. “I think sales will grow three to four times over current levels over the next three to four years, and I think the stock will go along with that.”
“If you look at the AI buildout today, who is really driving that?” Niles said. “They’re the most profitable companies in the world: it’s Microsoft, it’s Google, it’s Meta, and they’re the driving force behind this.”
Crucially, Nvidia expects second-quarter revenue to rise to $28 billion, up from the $26.6 billion analysts expected. Even with the prospects of increasing competition from Advanced Micro Devices and Google building its own custom chip, analysts expect Piper Sandler Nvidia wants to retain at least 75% of the AI accelerator market.
Nvidia has done everything asked of it, now it’s up to Wall Street to decide whether it’s time to break or consolidate even more milestones.
– CNBC’s Kif Leswing, Jeff Cox, Kate Rooney, Hakyung Kim, Lisa Kailia Han, Yun Li and Rohan Goswami contributed to this report.