Nvidia’s earnings were the highlights as we head into a challenging September. Picture Getty
Nasdaq Wrap
Brought to you by WeBull, Nasdaq Wrap is our weekly look at the highly influential, tech-heavy Nasdaq 100 index – movers and shakers over the past seven days or so, talking points and a brief look at what’s ahead.
August began with a dramatic dip in stocks, but by the end of the month, the market had staged a strong recovery, largely driven by a still-growing economy and positive earnings reports.
Many of the major US indexes reached or neared record highs.
| Code | Weekly move | Monthly move | YTD move |
|---|---|---|---|
| S&P 500 | +0.15% | +3.7% | +19% |
| Nasdaq Composite | -0.86% | +3.02% | +20% |
| Dow Jones | +0.88% | +3.01% | +10% |
The overall economic picture in the US remains strong, with corporate profits growing and consumer spending holding up.
However, the tech sector, which had been leading the market, faced a tough month.
Companies like Nvidia, despite its strong performance, couldn’t maintain the high growth rates it had previously achieved (read more on that below).
Tech stocks faced a sell-off across the board as valuations reached excessive levels, compounded by heightened expectations from investors and challenging year-over-year comparisons.
This shift allowed other sectors, including financials, healthcare, and utilities, to gain momentum and contribute to the broader market recovery.
One of the key factors driving the market’s resurgence was the Fed’s signalling at Jackson Hole that it might start easing interest rates soon.
“However, the next two-month stretch leading to the November election day has historically been seasonally challenging for stocks,” said the note out of brokerage firm, Edward Jones.
“If volatility reemerges, we will lean into it. Historically, the start of a rate-cutting cycle is positive for stocks when the economy is not in a recession.”
Earnings season, meanwhile, has been a bright spot, with S&P 500 companies seeing earnings grow by around 11% year-over-year in the second quarter, marking the fastest pace of growth since the end of 2021.
This positive momentum was bolstered by retail sales data, which showed a 1% increase in July, the strongest in 18 months.
Nvidia Corp (NASDAQ:NVDA)
Nvidia’s earnings report was the most highly anticipated announcement last week.
Nvidia reported impressive Q2 results, surpassing analysts’ expectations with earnings of $0.68 per share and revenues of US$30.04 billion, driven by a 154% increase in data centre revenue.
However, despite these results, Nvidia’s stock fell over 6% in after-hours trading. Analysts suggest the drop might be due to high investor expectations, as well as concerns about maintaining such rapid growth.
“One likely reason is because Nvidia didn’t beat earnings expectations by as much as many analysts expected,” said Alex Cousley at Russell Investments.
“Another reason is that the company’s third-quarter guidance was within the range of analyst expectations—but not at the upper end,”
Nvidia also revealed a US$50 billion share buyback program, and expects Q3 revenues to hit US$32.5 billion, exceeding Wall Street’s forecasts.
Additionally, Nvidia said it plans to boost production of its Blackwell AI chips, anticipating significant revenue in the fourth quarter due to strong demand for AI technology.
“If anybody was scared about a potential disappointment of demand for AI, this has gone,” said Alberto Tocchio at Kairos Partners.
“Of course, we are talking about a stock that had a big run, but we can be assured that the sector is still in demand.”
Apple (NASDAQ:AAPL)
Apple is apparently considering investing in OpenAI, a move that could significantly enhance its position in artificial intelligence.
Reports (not substantiated by the company) indicate Apple is interested in joining a funding round that could value OpenAI at over US$100 billion, with Thrive Capital leading the round and other tech giants like Microsoft and Nvidia also involved.
This potential investment follows the recent integration of OpenAI’s ChatGPT into Apple’s Siri, suggesting a growing collaboration between the two companies.
“In an increasingly technology-driven world, this investment would be a crucial step in securing Apple’s leadership in the future of artificial intelligence,” said Antonio Ernesto Di Giacomo at XS.com.
The round would be the largest funding boost for OpenAI since Microsoft’s US$10 billion investment in January 2023.
Apple’s participation would highlight the rising importance of OpenAI and reflect the competitive nature of the AI sector, with Nvidia contributing its hardware expertise.
Intel Corp (NASDAQ:INTC)
Intel said it was currently exploring strategic alternatives to address its underperforming business.
The company has engaged advisors, including Morgan Stanley, to evaluate options such as business divestitures and restructuring.
The announcement led to a 10% increase in Intel’s stock price on Friday.
CEO Pat Gelsinger has publicly acknowledged the company’s need to enhance operational efficiency and responsiveness.
Despite these efforts, Intel’s stock has declined nearly 60% year-to-date, largely due to intensified competition from Nvidia in the AI space.
Intel’s recent announcement of 15,000 job cuts and its ongoing development of the Lunar Lake processor reflect its broader strategy to reduce costs and innovate.
However, these measures have yet to fully restore investor confidence or signal a definitive turnaround.
Novavax Inc (NASDAQ:NVAX)
The FDA has granted Emergency Use Authorisation to Novavax Inc for its updated COVID-19 vaccine, which targets current strains and shows strong effectiveness against various new variants.
Novavax’s stock jumped 9% following the news.
The approval comes after the FDA approved Pfizer and Moderna’s COVID-19 vaccines the week before.
Novavax’s vaccine targets the JN.1 COVID-19 variant, which was the leading strain in the US earlier this year but now accounts for less than 1% of current cases.
Dollar General Corp (NYSE:DG)
Not traded on the Nasdaq exchange but the biggest decliner last week was Dollar General, which dropped 33%.
Dollar General erased over US$8 billion in market value after its Q2 net income came in 20% lower than the pcp at US$374m.
As major retailers like Walmart and Target lower prices, dollar stores have struggled to maintain their appeal. These stores, once a go-to for budget-conscious shoppers, are losing ground to larger competitors.
However, Dollar General said it plans to continue offering around 2,000 items for $1, sticking to its core pricing strategy.
As we head into September, stocks could be facing a tough test.
The month is known for being challenging for the markets, often seeing a dip after summer rallies.
Along with its historical weakness, this September could also be further strained by uncertainties such as the upcoming presidential election and global conflicts.
All eyes are now on the Fed’s upcoming decision on interest rates, slated for the 18th.
However there are some positive signs, such as a broad market recovery and improving stock performance outside of the tech giants.
The key US data to watch for this week will be Friday’s jobs report on a shortened trading week due to the US Labor Day weekend.
“This report on jobs growth and the unemployment rate in August has the potential to move stocks and bonds,” said Victoria Fernandez at Crossmark Global.
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