The market reaction to Nvidia’s results has been tepid and below average compared to the last 8 quarters. In the pre-market, Nvidia’s share price is higher by 2.5%, less than the 5% average move in the stock after its earnings report in the last 8 quarters. Considering the results were strong, what is holding back the stock price?
A quick recap on Nvidia’s numbers: revenues for Q4 were $39.3bn, the forecast for Q1 is $42.8bn. Net income was $22.9bn, and analysts expect net income to rise to $31bn in this quarter. There is a strong pipeline of demand for Blackwell chips, and even though gross profit margin was a touch weaker than expected, the company said this was temporary while it scaled up Blackwell chip production.
The share price is higher by 2.5% in the pre-market, after catching a bid ahead of the US open, however, it is still lower by 3% YTD.
The reason why Nvidia may not be rallying like it used to could be a problem for the entire Magnificent 7. The Magnificent 7 group of US tech stocks peaked in December last year, around the same time as USD/JPY reached a peak. So, why has a strengthening yen had an impact on the Magnificent 7 and on Nvidia? The yen has risen by 5% vs. the USD so far this year, which is a sign that money is moving from West to East, which is weighing on US stocks and boosting Asian indices, in particular tech stocks. DeepSeek’s arrival signifies that China is a force to be reckoned with when it comes to AI capabilities, and this is also knocking sentiment for US tech stocks, it could also limit the upside for Nvidia’s stock price after this solid earnings report.
Chart 1: Magnificent 7 and USD/JPY
Source: XTB and Bloomberg
The Magnificent 7 has had a depressed start to the year, at the same time Eastern tech stocks have surged. The Golden Dragon index, the US-listed index of Chinese tech firms, has outperformed the Nasdaq this year. Added to this, the Hang Seng, the Hong Kong index, is up by 18% YTD in USD terms, while the Nasdaq is down by 1.2% YTD. To conclude, if you want to know where US tech giants go next, follow USD/JPY.
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