NVIDIA, plunges 5.46%!

【Introduction】Dow Slightly Up, S&P 500 and Nasdaq Down; Nvidia Shares Plunge

On Thursday, February 26, Eastern Time, the three major U.S. stock indexes showed mixed results. Tech giant Nvidia and software leader Salesforce failed to boost the market, with Nvidia shares dropping over 5%.

Major Indices Close Mixed

The Dow rose 17.05 points, or 0.03%, to 49,499.20; the Nasdaq fell 273.70 points, or 1.18%, to 22,878.38; the S&P 500 declined 37.27 points, or 0.54%, to 6,908.86.

In economic data, last week’s initial unemployment claims were 212,000, below the expected 215,000, with the previous figure revised from 206,000 to 208,000. For the week ending February 14, continued claims were 1.833 million, below the forecast of 1.858 million, and the previous figure was revised from 1.869 million to 1.864 million.

Federal Reserve Governor Goolsbee said that within the Fed, he is one of the more optimistic about rate cuts. “We want to ensure inflation remains on track. If inflation cools, rates could be lowered more this year. Rates can be reduced, but we don’t want to cut sharply before inflation eases,” Goolsbee stated.

Fed Governor Mester said that current price stability persists, despite “turbulence” in the credit sector, and no major risks have been seen. She believes excessive regulation hampers credit creation. Mester mentioned labor market improvements but said a full recovery will take time, and AI can help curb inflation. She denied the U.S. faces inflation issues, citing abnormal food prices. Mester suggested four rate cuts totaling 1 percentage point this year, to be implemented as early as possible.

The International Finance Association’s report shows global debt reached a record $348 trillion at the end of last year, an increase of nearly $29 trillion. This marks the fastest growth since the early COVID-19 pandemic in 2020, shifting away from a structure mainly led by households or businesses. Notably, government debt in the U.S., Eurozone, and other countries exceeds $10 trillion.

Nvidia Shares Drop Over 5% After Earnings

Nvidia reported quarterly earnings that exceeded expectations and raised guidance, but the market remained cautious. On Thursday, after opening, Nvidia’s stock plunged sharply, falling nearly 6%, and closed down 5.46%.

Analysts noted that Nvidia’s earnings did not dispel concerns about an “AI bubble,” with investors worried about the sustainability of AI spending.

Most large tech stocks declined on Thursday: Tesla fell over 2%, Google dropped more than 1%, Amazon declined over 1%, Apple fell 0.47%, Microsoft rose 0.28%, and Facebook increased 0.51%.

Chip stocks generally declined: the Philadelphia Semiconductor Index fell 3.19%, Applied Materials dropped nearly 5%, Lam Research down over 4%, ASML down over 4%, ON Semiconductor declined over 3%, and Broadcom fell more than 3%.

Morgan Stanley’s U.S. Equity Strategy and Themes team released a report stating that recent market reactions to “AI disruption” have been excessive. Investors are questioning whether AI can truly save or make money for companies at this stage. The team analyzed over 10,000 financial reports and conference records using AI models, finding that companies are actually gaining tangible AI benefits, with momentum continuing to grow.

In the State of the Union address, President Trump announced new “guidelines” for leading data center and AI companies: self-powered and self-funded.

Next week, major tech firms will meet with President Trump at the White House to sign related commitments. A White House official confirmed that Amazon, Google, Meta, Microsoft, xAI, Oracle, and OpenAI will sign agreements on March 4. This move is part of Trump’s latest efforts to protect consumers from rising electricity costs.

Software Sell-Off May Have Bottomed Out?

One of the biggest victims of “AI disruption” fears, Salesforce, rose 4% after announcing quarterly earnings that beat expectations. However, its revenue forecast for fiscal 2027 disappointed investors.

James Demmert, Chief Investment Officer of Main Street Research, said, “Salesforce’s earnings are solid, but its weak guidance cannot quell the software sector’s sentiment collapse. Due to AI advances, Salesforce’s outlook is grim, but we believe the recent sell-off in the software industry is overdone.”

Hedge fund GCQ Funds Management announced that the sell-off in software stocks has bottomed out. They used the market correction to buy about AUD 200 million worth of tech stocks. The fund reduced holdings in some top-performing stocks, including European luxury brands, reallocating funds into software stocks that have seen significant price declines.

The iShares Expanded Tech & Software Sector ETF (IGV) rose 1% on Thursday but remains in a bear market, about 30% below its recent highs.