Nvidia shares surge 15% as bumper earnings drive global stock rally

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Global stock markets rallied on Thursday as chipmaker Nvidia’s bumper overnight results boosted technology groups and pushed indices in Japan and Europe to all-time highs.

Nvidia surged more than 14 per cent in pre-market trading after it reported a 265 per cent rise in revenues late on Wednesday, blowing past analysts’ expectations, and projected even stronger sales growth. Contracts tracking the S&P 500 index rose 1.3 per cent, while those tracking the tech-heavy Nasdaq 100 jumped 2.1 per cent.

Europe’s Stoxx 600 index hit a record high, and was 0.8 per cent higher in mid-morning trading on Thursday, above its previous peak reached in January 2022. Japan’s main stock market index, the Nikkei 225, also climbed past its all-time high earlier on Thursday after a 34-year wait.

Nvidia’s results and bullish forecasts were the catalyst. The company’s market value has surged by about $600bn since the start of the year, driven by investor frenzy over artificial intelligence. Its gains have powered around a quarter of the S&P’s gains since January, but also added to concerns over the top-heaviness of the broader US market.

Nvidia’s earnings last night were “biblically important” for the trajectory of the wider market, said Charlie McElligott, managing director of cross-asset strategy at Nomura.

The company had become “the poster child of the AI and megacap tech-boom” whose “halo effect has almost single-handedly held up” the US stock market in recent months, he added.

The results even overshadowed the release of the minutes from the Federal Reserve’s latest meeting, which reaffirmed that officials were cautious about cutting rates too quickly in January.

Investors had been wondering whether AI was “just a fad or something substantial that can actually improve productivity growth”, said Manish Kabra, head of US equity strategy at Société Générale.

Wednesday night’s results suggested the latter may be true, he said, adding that the market, though ebullient on Thursday, still looked “rationally optimistic” rather than “irrationally exuberant”.

A wave of excitement about AI has boosted markets beyond the US. European tech stocks have also surged in recent months, with the Stoxx 600 tech index having outperformed Wall Street’s so-called Magnificent Seven, after adjusting for volatility, since the start of October, according to analysts at Bank of America.

However, certain stocks and equity indices were beginning to approach “bubble” territory, they said, with a growing chorus of investors in recent weeks drawing parallels between the current tech-led rally in the US and the dotcom era of the late 1990s.

Others have grown nervous that global equity markets have climbed to record highs despite expectations that economic growth will slow in the year ahead, and as inflation in the US shows signs of rebounding, meaning that interest rates may not fall as fast as markets had previously hoped.

“Can one get inflation under control with stock and crypto markets adding trillions of [dollars of] paper wealth?” said analysts at JPMorgan.

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