Nvidia's Results Have Divided Investors

As we approach the end of November, a holiday-shortened trading week awaits investors due to Thanksgiving and Black Friday. Investors are facing a loss of confidence in AI-focused markets amid Nvidia's striking earnings report.

On Friday, the markets closed out a week filled with daily gains but weekly losses. The tech-heavy Nasdaq Composite (NASDAQ: ^IXIC) ended the week down more than 2%, while the S&P 500 (S&P 500: ^GSPC) and Dow Jones Industrial Average (Dow Jones: ^DJI) saw declines of about 1.5%.

The strong employment report for September, good earnings from Nvidia, and Walmart's positive third-quarter report led to one of the biggest daily reversals in the markets in a decade on Thursday. The S&P 500 started with more than a 1.5% gain at open but closed with a drop of more than 1.5%. The volatility in the Nasdaq was even greater.

In the coming week, the economic calendar will speed up further as the government clears backlogs in data collection that occurred earlier this month. Producer price index data for September and retail sales figures prepared by the Census Bureau will be released on Tuesday. Investors will also closely monitor The Conference Board's consumer confidence numbers for November.

In the corporate world, a relatively quiet earnings week awaits investors. Alibaba Holdings (BABA), Dell Technologies (DELL), and Kohl's (KSS), among other retailers, will make up the week's calendar.

The technology sector has had a difficult month. Stocks known as the "Magnificent Seven," including CoreWeave (CRWV) and Oracle (ORCL)—companies focusing on crypto and AI—have experienced sharp declines over the past month. Meta (META) and Oracle saw losses of over 15% and 25%, respectively. Meanwhile, Microsoft (MSFT) shares lost 9% in the past month. Nvidia shares have remained nearly flat during this period, whereas smaller chip companies like AMD (AMD) and Intel (INTC) have experienced around 10% losses.

Nvidia's earnings report on Wednesday evening presented many exciting elements for AI investors. The company's CEO, Jensen Huang, downplayed the fears of an AI bubble simply, saying, "We're seeing something very different."

Initially rising Nvidia shares began to lose value on Thursday throughout the day. On Friday, the stock dropped another 1%. Jake Behan, head of capital markets at Direxion, wrote in an email, "Nvidia has reaffirmed the market's emotional collateral."

Market reaction to a positive earnings report underscores investor sentiment as the year’s final month approaches. Capital.com analyst Kyle Rodda noted, "There wasn't momentum to continue the rally on Thursday. We passed two critical risk events with positive outcomes, but this did not eliminate the pessimism surrounding the markets."

This month’s concerns are focused on the infrastructure spending boom deemed necessary by major tech companies to meet AI demand. Chris Zaccarelli, chief investment officer at Northlight Asset Management, expressed, "This spending boom could genuinely turn into a bubble with hundreds of billions of dollars in commitments."

Zaccarelli added, "In the meantime, the largest technology companies are highly profitable and transforming by reinvesting their data centers, servers, and chips; this spending is real."

Institutional investors, such as hedge funds and pension funds, saw an influx of $348 billion into Nvidia shares in the third quarter by adding names of tech giants to their portfolios. Total institutional asset inflows for Nvidia and Microsoft have surpassed $2 trillion.

While stocks experienced a tough week, the major indices remain well above the lows reached in April during President Trump's surprise "D-Day" tariff announcement.

Bitcoin (BTC-USD) also struggled to maintain strength. The world's largest cryptocurrency approached $80,000 on Friday, nearing stagnation levels from April, but faced a sharp decline. Since the beginning of the year, Bitcoin has lost almost 10% of its value.

Companies that have adopted Bitcoin as a business model, such as Strategy (MSTR), which has drawn attention with its digital asset treasury model led by Michael Saylor, have seen declines of more than 40% this year. While it may be tempting to view Bitcoin's decline as an isolated event in the more speculative crypto markets, these markets have become mainstream parts of financial markets, and the sales that occurred this week were interpreted as "an agent of speculation."

Macquarie Bank's global strategist Viktor Shvets likened the ties between Artificial Intelligence and digital platforms (chips, data centers, blockchains, stablecoins, and crypto) to the Japanese concept of "keiretsu," which describes companies acting together like independent competitors. "While these connections facilitate collaboration, they can also create vulnerabilities in times of pressure," he added.

If a downward trend in technology emerges, it is likely that crypto will also decline alongside this "American Keiretsu."

Economic data: Chicago Fed national activity index, October; Dallas Fed manufacturing activity, November (previous -5.0)

Earnings: Agilent Technologies (A), Symbotic (SYM), Keysight Technologies (KEYS), Zoom Communications (ZM), StoneX Group (SNEX)

Economic data: Retail sales, month-over-month, September (+0.6% previous); Producer price index, month-over-month, September (-0.1% previous); PPI excluding food and energy, month-over-month, September (-0.1% previous); PPI, year-over-year, September (+2.6% previous); PPI excluding food and energy, year-over-year, September (+2.8% previous); FHFA house price index, month-over-month, September (+0.4% previous); Richmond Fed manufacturing index, November (-4 previous); The Conference Board consumer confidence, November (93.3 expected, 94.6 previous); Pending home sales, month-over-month, October (0% previous); Dallas Fed service activity, November (-9.4 previous)

Earnings: Alibaba (BABA), Analog Devices (ADI), Dell Technologies (DELL), Autodesk (ADSK), Workday (WDAY), Zscaler (ZS), HP Inc. (HPQ), DICK'S Sporting Goods (DKS), Burlington Stores (BURL), Best Buy (BBY), Urban Outfitters (URBN), Pony AI (PONY), Abercrombie & Fitch (ANF), Kohl's (KSS)

Economic data: MBA Mortgage Applications, week ending November 21 (-5.2% previous); Initial jobless claims, week ending November 22 (220,000 previous); Durable goods orders, September, preliminary (+2.9% previous); MNI Chicago PMI, November (43.8 previous); Federal Reserve's Beige Book

Earnings: Deere & Company (DE), Li Auto (LI), Diginex Limited (DGNX), New Fortress Energy (NFE)

Economic data: U.S. markets closed for Thanksgiving holiday.

Earnings: U.S. markets closed for Thanksgiving holiday.

Economic data: No noteworthy economic data.

Earnings: Nordic American Tankers (NAT), Platinum Group Metals (PLG)