Nvidia's earnings report dispelled concerns about an AI investment bubble, prompting a broad market rally and reinforcing UBS's bullish stance on underlying infrastructure fundamentals.
Nvidia reported second-quarter results after Wednesday’s close, with revenue more than doubling year-over-year to $96.22 billion (approximately NT$3 trillion), significantly surpassing analyst estimates of $92.17 billion. Adjusted earnings per share came in at $2.22 (approximately NT$70), beating the projected $2.10. Buoyed by the results, Nvidia shares surged more than 7% at Thursday’s open, lifting the Philadelphia Semiconductor Index by 2.3%, the Nasdaq Composite by nearly 0.9%, and pushing the S&P 500 higher. The robust figures effectively eased concerns that the AI spending boom may have peaked.
The company posted third-quarter revenue guidance of $108 billion (approximately NT$3.4 trillion), again exceeding market expectations. Notably, data center revenue surged 117% year-over-year to $89 billion (approximately NT$2.8 trillion), accounting for 92% of total revenue—a clear indication that AI infrastructure demand remains robust. During the earnings call, Nvidia’s CFO delivered an upbeat outlook, projecting approximately 70% revenue growth for fiscal 2028. This figure far exceeds the 44% growth anticipated by analysts surveyed by the London Stock Exchange Group (LSEG).
Nvidia CEO Jensen Huang emphasized that demand for AI accelerators continues to expand, noting these chips remain critical components for training and running AI models. Market strategists echoed the bullish sentiment. A team led by Mark Haefele, chief investment officer of UBS Global Wealth Management, wrote in a Thursday morning report: "We maintain confidence in the broader AI growth theme and believe it remains a key driver of our positive market outlook." The report acknowledged that while ongoing concerns about the sustainability of AI capital expenditure and the circularity of certain AI financing deals may trigger periodic tech-sector volatility, the second-quarter earnings season has demonstrated that fundamentals remain strong. Amanda Lyons, head of research at Energy Group Capital, added that Nvidia’s results show the primary constraint on this AI cycle is not a lack of end-demand but rather physical bottlenecks in memory and power. This dynamic pushes back the timeline for any potential cycle reversal and gives investors reason to extend their earnings growth expectations for Nvidia and second- and third-tier beneficiaries of the AI buildout.
Tech and semiconductor stocks broadly strengthened on Thursday. Salesforce surged more than 13% at the open after reporting second-quarter adjusted earnings per share of $5.90 (approximately NT$190), well above the $3.27 analysts had projected. Micron Technology and Arm rose 1% and 3%, respectively. Additionally, Kioxia and SanDisk announced a $31 billion (approximately NT$980 billion) joint venture to boost flash memory production, further lifting sector sentiment. Conversely, not all tech stocks benefited. HP (HPQ-US) saw its shares plunge nearly 10% in early trading despite reporting fiscal third-quarter results that beat Wall Street expectations and issuing full-year profit guidance above market estimates, as investors weighed concerns over PC and printer demand.
On the macroeconomic front, the U.S. July Personal Consumption Expenditures (PCE) price index held at 3.7% year-over-year, remaining above market expectations and well above the Federal Reserve’s 2% target. With inflation elevated, market attention is focused on Federal Reserve Chair Kevin Warsh’s speech Friday at the Jackson Hole Global Central Bank Symposium. This marks his first major public address since taking office, and investors are anticipating clearer, potentially slightly hawkish policy guidance. According to the CME FedWatch Tool, markets are pricing in a 38.1% probability of a Federal Reserve rate hike in September. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, noted that the latest data is not yet enough to alter the September decision, but if subsequent data points reflect the same trend, pressure on the Fed to act could mount. Meanwhile, the yield on the 10-year U.S. Treasury note rose to 4.66%, the dollar was little changed, gold hovered near $4,600 per ounce (approximately NT$150,000), and Brent crude edged higher, potentially snapping a three-day losing streak.
Nvidia’s results lifted Asian chip stocks on Thursday. South Korea’s SK Hynix and Samsung Electronics closed up approximately 2.5% and 1.7%, respectively, while Japan’s Kioxia gained 5%. Overall Asian equity markets were mixed, with indices in Seoul, Shanghai, and Taipei closing higher, while those in Tokyo, Hong Kong, Sydney, and Wellington ended lower. In Taiwan, market focus centered on whether the AI supply chain could sustain its rally. The benchmark index had surged 663.16 points in the previous session to close at 45,832.62, supported by combined net buying of NT$57.91 billion (approximately $1.8 billion) from the three major institutional investor categories. Participants noted that if Nvidia’s earnings effect drives continued strength across AI servers, cooling, PCB, optical communications, and semiconductor supply chains—combined with Taiwan Semiconductor Manufacturing holding firm and sustained foreign investor buybacks—the market retains a chance to challenge new highs. However, margin financing increased by NT$7.87 billion (approximately $248.4 million) in a single day, signaling clear retail investor entry and suggesting short-term positioning pressure could shift the market from a one-way surge to high-level consolidation.
Nvidia shares remain up 13% year-to-date, though the stock has declined the day after each of its past four earnings reports. Whether this release can break the pattern of “beating expectations yet still seeing the stock decline” has become a key market focus. Jay Hatfield, CEO of Infrastructure Capital Advisors, observed that while the market appears to be waiting for the Federal Reserve on the surface, what it is truly waiting for is Nvidia—with some even calling Jensen Huang the "Federal Reserve chair of the AI world."