Nvidia appeared poised for a decline on Wednesday following the release of Alphabet’s quarterly earnings.
Alphabet’s report presented mixed implications for Nvidia, part of the elite group of semiconductor stocks known as the “Magnificent Seven.” Nvidia’s stock dropped 1.8% to $120.43 in premarket trading, after already falling 0.8% on Tuesday.
Alphabet’s earnings revealed substantial investment in its cloud and artificial intelligence systems, with capital expenditures reaching $13.2 billion for the quarter ending June 30, a year-over-year increase of more than 90%.
This investment surge could bode well for Nvidia, which maintains a dominant position in the market for graphics processing units (GPUs) essential for powering AI large-language models.
However, Nvidia investors may find it challenging to get overly optimistic about the report, as Alphabet maintained its spending guidance for the remainder of 2024 instead of increasing it.
Ben Reitzes, head of tech research at the data analytics and investment firm Melius, noted in a research report that the earnings report “seems like a good read” for Nvidia.
“There’s no 20% upside revision to capital expenditure this quarter, but it certainly appears that there could be potential for an improved outlook if management aims for revenue growth from Cloud and AI Search,” Reitzes added.
Meanwhile, fellow chip manufacturer Advanced Micro Devices saw a 1.2% decline in pre-market trading, and Broadcom fell by 1.4%. Conversely, Texas Instruments rose by 2.8% following its own quarterly earnings report, which highlighted its potential as a safe haven among semiconductor stocks amid geopolitical instability.
Nvidia has achieved remarkable returns this year, surging by 148% and even momentarily surpassing Microsoft as the world’s most valuable company last month. The benchmark S&P 500 index has increased by 16% in 2024, with the Nasdaq Composite rising by 20%.
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