Nvidia's Success Was Not Enough: Artificial Intelligence Markets Are Shaken

The AI Rally is Weakening

Investments in artificial intelligence that propelled U.S. stocks to their peak have started to show signs of weakening as of November. Nvidia, which failed to meet investor expectations, could not prevent declines amid negative developments during this process.

Nvidia’s Earnings Did Not Meet Expectations

D.A. Davidson Technology Research Director Gil Luria commented on Nvidia's third-quarter earnings that they were "extraordinarily good, probably the best quarter they announced this year." However, after the earnings report, the stocks initially saw a rise but recorded significant losses by the end of the day. This situation has raised investor concerns about the market outlook.

Market Uncertainty is Worrying

Ken Mahoney, CEO of asset management firm Mahoney Asset Management, stated that the markets are facing a "perfect storm." High inflation, Federal Reserve (Fed) interest rate cut expectations, and statements from key players in the market are among the main factors pressuring AI investments.

Micro-Level Issues

Nvidia’s financial report has raised concerns among investors with high inventory levels and unusual patterns in deferred revenues. Swissquote Senior Analyst İpek Özkardeşkaya warned that "Nvidia is recording high upfront payments from customers as revenue before the chips are delivered." This situation indicates potential problems if future orders slow down.

Market Review and Fed Expectations

Market analysts indicate that sentiment on Wall Street has shifted from exuberance to caution. Neuberger Berman Senior Research Analyst Jamie Zakalik emphasized that concerns following the earnings report were significantly influenced by the Fed’s interest rate decisions. "If even a strong earnings report can't lift the stock group, it is quite difficult to see a positive catalyst for the rest of the year," he said.

As a result, the future of tech stocks remains quite uncertain, depending on potential changes in the Fed’s interest rate policy. We are going through a period where investors need to be cautious.