Markets shrug off Nvidia's report

One of the key market events this week was Nvidia's quarterly earnings report, which came out after Wednesday's main U.S. stock market session. The main question among investors was whether the DeepSeek uproar would affect demand for artificial intelligence chips. Overall, expectations were high, with analysts forecasting a 72% revenue increase by the final quarter of 2024.      

In the end, Nvidia again beat GAAP expectations. Year-over-year revenue rose 78% to $39.33 billion, operating income soared 77% to $24.03 billion, and net income jumped 80% to $22.09 billion. Earnings per share rose 82% to $0.89. The Computing and Networking segment generated revenues of $36 billion, up 101% year-on-year, while new Blackwell accelerators contributed an impressive $11 billion.         

More importantly, the chipmaker expressed confidence in the outlook. The company expects continued growth, thanks to the rapid expansion of the artificial intelligence sector. Nvidia forecasts revenue of $43 billion for the first quarter of 2025, beating analysts' expectations of $41.78 billion. However, this strong report has not led to a big stock run-up, unlike on previous occasions.      

On the bright side, there have also been no major sell-offs either. When considering the future of Nvidia stock, it is worth noting that concerns about slowing growth may already be discounted. The valuation multiple has fallen from a high of 50 times forward earnings in 2023 to a multi-year low of 29 times earlier this week.        

Is the U.S. market ready to resume its uptrend?    

Gone are the days when the U.S. stock market moved to the beat of tech giants. Now, inflation concerns take center stage, especially in light of Trump's latest policy moves. His plans to deport illegal immigrants could lead to labor shortages, while potential trade wars with neighboring countries could trigger import prices.      

In this environment, the Fed may have to raise interest rates again or keep them at elevated levels for an extended period, neither of which bodes well for the economy, households, or businesses. No wonder, market sentiment takes a hit every time Trump comments about tariffs, whether directed at Mexico, Canada, or Europe.      

This week's next major challenge for markets will be the release of Q4 core PCE price index data on Friday, arguably the Fed's most crucial inflation gauge. If the numbers are higher than expected, it would increase the likelihood of the Fed maintaining its tightening stance, which could further dampen market sentiment.