US open: Stocks slip on lukewarm reaction to Nvidia earnings

(Sharecast News) - An underwhelming market reaction to Nvidia's blockbuster earnings report resulted in a subdued start for the wider US stock market on Thursday, with indices pulling back slightly after strong gains the previous session.

By 1514 BST (1014 ET), the Dow was flat while the S&P 500 and Nasdaq were down 0.3% and 0.4% respectively.

Reporting its results after the closing bell on Wednesday, chip giant Nvidia smashed earnings and revenue expectations, powered by continuing demand from AI data centres, beat estimates with its forward guidance, raised its dividend by 25 times and added a whopping $80bn to its share buyback plan.

"These were blockbuster results, even by its increasingly absurd standards, with revenue up 85% year-on-year and both revenue and earnings exceeding already high expectations. The guide is just as eye-catching, with the top end pointing to almost 100% revenue growth in the coming quarter, and NVIDIA has a habit of clearing the bar it sets for itself," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

"The question from here is not whether demand is strong today, but how long this level of growth can keep outrunning expectations. NVIDIA still looks exceptionally well placed, with its strength stretching beyond chips into networking, software and full data centre systems, which makes it difficult for rivals or in-house alternatives to match at scale."

Nvidia shares, however, were more or less flat as markets opened on Thursday. Chip peers Intel and AMD both dropped sharply, while Micron Tech and Broadcom edged higher.

In other equity news, shares in Walmart dropped after the retail giant posted a rise in first-quarter sales and profits but issued softer-than-expected projections for the current quarter. Walmart reaffirmed its full-year guidance for fiscal 2027, forecasting annual sales growth of between 3.5% and 4.5%, albeit at the upper end of the range, but second-quarter profit guidance of 72 to 74 cents a share came in slightly below Wall Street forecasts.

Stocks rose strongly on Wednesday after Donald Trump suggested that peace talks with Tehran were in the final stages, sending Brent crude prices down 5%. Bond yields also fell sharply after the 10-year yield hit a 16-month high the previous session.

Oil prices, however, were higher on Thursday, with Brent rebounding 2.2% to $107.38 a barrel, while 10-year bond yields rose 2.7 basis points to 4.619%.

Investors were also digesting the news that Elon Musk's SpaceX is set to debut on the New York Stock Exchange some time next month, with the aerospace and AI company potentially valued at $1.75trn.

"This could be a blockbuster summer for IPOs with OpenAI also expected to list in the coming weeks. Thus, we could get two mega cap IPOs within weeks of each other. How the market absorbs these new listings will be crucial for the future of the AI trade, as both companies are at the heart of the AI revolution," said Kathleen Brooks, research director at XTB.

In economic data, US manufacturing growth hit its highest level since 2022, with the S&P Global manufacturing PMI hitting 55.3 in May from 54.5 the month before, smashing the 54.0 consensus forecast.

In other news, US jobless claims fell 3,000 to 209,000 last week, more or less in line with the 210,000 consensus forecast. US housing starts and building permits data both came in better than expected, while the Philly Fed manufacturing index disappointed.