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Just yesterday, Nvidia crushed earnings, yet plummeted on AI bubble concerns and speculation that the Fed won’t cut rates in December.
However, with no bubble and speculation, we could see a rate cut after all, NVDA is rebounding in pre-market. Helping, the company just posted EPS of $1.30, which beat estimates by four cents. Revenue of $57 billion, up 62.5% year over year, beat by $1.91 billion. Data center revenue of $51.2 billion was up 25% quarter over quarter, and up 66% year over year.
Fueling more upside, analysts at Raymond James reinstated their strong buy rating on NVDA.
The firm said, NVDA “leads in AI and is a core holding. NVIDIA retains significant competitive moats with an extensive and mature software stack resulting from over a decade head start, a strong community supported by the leading developers, and its full-stack systems approach and platform cadence,” as quoted by CNBC.
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After swinging in red just yesterday, the major indices are regaining lost momentum.
In fact, the S&P 500 is up about 37. The SPDR S&P 500 ETF (SPY) is up about $2.73. The Dow Jones is up 276 points, with the Nasdaq up 155.
All after the Federal Reserve President John Williams suggested that the central bank cut rates in December. He believes the central bank can lower its key interest rate from here, as labor market weakness poses a bigger economic threat than higher inflation.
As a result, the odds of a rate cut jumped to 70%, as compared to 50-50-coin toss odds yesterday, and from 95% odds last month.
AI stocks are also pushing higher this morning, despite more talk of a bubble, which doesn’t exist. Remember, according to Goldman Sachs, the AI story is just getting started. Also, according to Wolfe Research, as quoted by CNBC, “We continue to believe that concerns over an AI bubble bursting are overblown.”
Even Nvidia CEO Jensen Huang dispelled bubble fears.
“There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different,” the Nvidia CEO told analysts on the quarter’s earnings call as he walked through $57 billion in quarterly revenue, a $65 billion forecast, and sold-out cloud GPUs, as reported by QZ.com.
Again, there’s no bubble.
With markets melting down and the idea that we won’t see more interest rate cuts this year, Bitcoin is now down to $83,882.
Not helping, Bitcoin ETF withdrawals jumped to $870 million.
Plus, there’s a good deal of market uncertainty, as investors question whether the Federal Reserve will cut interest rates in December. If the central bank holds off on cutting interest rates, Bitcoin could come under even more pressure. After all, when borrowing costs are higher, risk-on assets are less appealing.
However, with Fed President John Williams suggesting a cut, Bitcoin could regain some of its lost momentum. Unfortunately, Williams isn’t the only one deciding on interest rates, so we really have to take what he’s saying with a grain of salt.
With Bitcoin bloodshed, stocks like Strategy (NASDAQ: MSTR), MARA Holdings (NASDAQ: MARA | MARA Price Prediction), and Riot Platforms (NASDAQ: RIOT) have been devastated. However, if we hear more encouraging Fed rate cut news, as we’re hearing today, these names could easily pivot higher.
It’s all a wait-and-see right now.
If another Fed official comes out with negative rate cut news, the rally will fade off and die. So, be cautious at the moment.
Contact [email protected] for any questions or corrections.
Ian Cooper is a veteran market analyst and investment strategist with more than 20 years of experience covering stocks, commodities, and macro trends. Since 1999, he has helped investors identify market opportunities using a blend of technical analysis, fundamental research, and market sentiment.
He is the creator of the ADD News Flow Strategy, which focuses on trading market reactions to major news events and investor psychology. Cooper was also among the analysts who warned about the 2008 financial crisis and major financial institution collapses ahead of the broader market.
Before joining 247 Wall St., Cooper wrote extensively for InvestorPlace and other financial publications, covering market trends, trading strategies, and investment opportunities.
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