Asian chip firms lifted by Nvidia forecast but broader markets struggle

Asian chip firms rallied Thursday following more blockbuster earnings from Nvidia that eased worries over the AI investment boom, though the euphoria was tempered by US data showing stubbornly high inflation.

In a highly anticipated report, the world’s most valuable company shattered forecasts by unveiling revenues more than doubled on-year in the second quarter and said it expected another blowout in July-September.

Nvidia is considered the bellwether for the AI spending frenzy, with its results largely determined by mega purchases from AI giants such as OpenAI, Amazon, Microsoft and xAI.

The firm has led an eye-watering rally by tech firms over the past year and in October became the first to hit a market capitalisation of $5 trillion owing to scorching demand for its chips.

However, the investors have been growing increasingly worried about when the vast sums of cash being pumped into the AI sector will see a meaningful return, if ever.

That saw a painful selloff in July that wiped trillions off valuations. While firms have enjoyed a slight recovery this month, traders remain uncertain.

Nvidia’s report helped soothe some of those fears, with CEO Jensen Huang saying: “The AI infrastructure buildout is at full steam.”

Charu Chanana ay Saxo Markets wrote: “This was another beat-and-raise quarter from Nvidia, but the biggest positive was not the quarterly beat itself. 

“It was management effectively telling investors that AI demand remains supply-constrained even at this scale, and guiding to around 70 percent revenue growth in fiscal 2028. 

“That is a powerful counter to the narrative that the AI capex cycle is already peaking.”

Shares in Nvidia, which reported as Wall Street closed, rose around five percent in after-hours trade.

Asian firms followed suit, with South Korea’s SK hynix and Samsung up from two to three percent with Japan’s Kioxia more than four percent higher. Taiwan’s TSMC also advanced.

However, broader markets struggled.

Seoul and Taipei rose with Shanghai, but there were losses in Tokyo, Hong Kong, Sydney, Singapore, Wellington and Manila.

The tepid performance came after figures showed the Federal Reserve’s preferred gauge of inflation remained stuck at a three-year high of 3.7 percent in July. 

Another report showed GDP growth for the second quarter came in at 1.5 percent, in line with estimates.

The personal consumption expenditure reading has been above the central bank’s two percent target for more than five years, with upward pressure mostly coming from surging oil prices caused by the Iran war.

It comes as central bankers and other economic policy makers prepared to kick off their annual Jackson Hole symposium in Wyoming, where investors will be keeping a close eye on Fed boss Kevin Warsh’s speech hoping for clues about his plans for interest rates.

The latest figures “are hardly recessionary signals and provide little reason to expect any hint of dovishness from Kevin Warsh”, wrote Matt Simpson, a market analyst at City Index.

Still, hopes for an easing of inflation down the line have been helped by oil continuing to fall this week as Iran and Oman edge towards a deal to open a temporary shipping corridor in the Strait of Hormuz.

Both main contracts have dropped more than eight percent since Friday.

However, analysts have noted that the details have remained sketchy, including whether there will be a fee to access the waterway.

– Key figures at around 0200 GMT –

Tokyo – Nikkei 225: DOWN 0.1 percent at 66,228.61

Hong Kong – Hang Seng Index: DOWN 0.3 percent at 25,582.13

Shanghai – Composite: UP 0.1 percent at 3,914.65

West Texas Intermediate: DOWN 0.6 percent at $81.78 per barrel

Brent North Sea Crude: DOWN 0.5 percent at $87.43 per barrel

Dollar/yen: DOWN at 159.25 yen from 159.37 yen on Wednesday

Euro/dollar: UP at $1.1657 from $1.1651

Pound/dollar: UP at $1.3592 from $1.3591

Euro/pound: UP at 85.77 pence from 85.72 pence

New York – DOW: DOWN 0.2 percent at 53,463.88 (close)

London – FTSE 100: DOWN 0.1 percent at 10,878.12 (close)

dan/jm