Introduction: Nvidia's robust quarter fails to excite investors
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In today’s tech landscape, what does it take for a company to see its share price rise? Nvidia might be pondering this question after delivering strong earnings last night, coupled with a confident growth forecast, yet receiving a muted response from Wall Street.
The semiconductor giant reported an exceptionally strong quarter, achieving record quarterly revenue of $68.1 billion for October-December 2025. This figure represents a 20% increase compared to the third quarter of the previous year and a remarkable 73% growth year-on-year.
Nvidia attributed its sales surge to accelerated computing and artificial intelligence (AI), with high demand for its advanced Blackwell chip.
“Enterprise adoption of agents is skyrocketing. Our customers are racing to invest in AI compute — the factories powering the AI industrial revolution and their future growth.”
These were the words of Jensen Huang, Nvidia’s founder and CEO, addressing investors on the rapid uptake of AI agents by companies.
Looking ahead, Nvidia forecasted another significant revenue increase in the current quarter, projecting sales to reach $78.0 billion, surpassing analysts’ expectations.
Despite an initial rally in after-hours trading following the earnings release, Nvidia’s stock soon reversed course, ultimately closing just 0.2% higher.
“The initially positive reaction faded as the company’s conference call offered limited detail on the revenue outlook, leaving the chipmaker’s shares little changed by the end of extended trading. So perhaps a sign of investors’ increased anxiety over AI valuations.”
Jim Reid of Deutsche Bank summarized the market’s response, noting the lack of detailed guidance contributed to the subdued share movement.
Nvidia’s shares have already surged approximately 1,300% over the past five years, leading to a valuation that many consider "priced for perfection." Consequently, even exceptional sales growth appears to be fully anticipated by investors.
Additionally, the broader market environment is marked by concerns that AI advancements could increase white-collar unemployment, disrupt software-as-a-service companies, payment providers, travel and real estate agencies, and potentially trigger a mortgage market downturn.
Kathleen Brooks, research director at XTB, identified several reasons behind the muted market reaction to what she described as "Nvidia’s A* earnings report":
“Nvidia and the semiconductor space has outperformed the broader tech sector so far this year. Nvidia’s results suggest that demand for AI is strong, and fears of an AI bubble are overdone. Thus, investors could pile into the less loved parts of tech, for example software, before going headfirst into Nvidia. The Nasdaq e-mini contract is higher by 1.4% after Nvidia’s earnings report.
Secondly, this report did not generate much reason for disappointment, but even so, some investors may have hoped that CEO Jensen Huang would boost sales pipeline estimates for this year above $500bn. Huang was also asked about hyperscalers’ and their future capex plans now that there was some pressure on their cash flows. This did not bother Huang, but it could sow a seed of doubt in the mind of investors.
Overall, the initial reaction to Nvidia’s results suggest that investors are still unwilling to chase a higher trend in tech stocks right now, even after Nvidia’s stunning earnings report. This report will likely be pored over in detail on Thursday, but for now it is not driving a significant rally in the share price.”
The agenda
8.30am GMT: Christine Lagarde testifies to the Committee on Economic and Monetary Affairs (ECON) of the European Parliament
9.30am GMT: UK’s Office for National Statistics publishes latest quarterly NEETs data
1.30pm GMT: US weekly jobless claims
Richard Clode, portfolio manager at the Global Technology Leaders Team of Janus Henderson Investors, explained how the discussion around Nvidia’s valuation has evolved recently:
“Nvidia’s stock has derated materially over the past six months, with the share price stagnating despite 50% positive earnings revisions.
As a result, the debate has shifted away from near-term results and toward the sustainability of AI capex spending, amid concerns around its quantum, monetisation and potential cashflow degradation. The muted reaction to Nvidia’s blowout guidance mirrored last quarter and reflects this ongoing debate.
Whether Jensen can move the conversation forward at next month’s GTC event remains to be seen, but in the interim, despite broader market concerns about an AI bubble and elevated technology valuations, Nvidia continues to derate. It now trades at a significant discount to AI peers and on a similar multiple to McDonald’s.”
EBRD highlights ongoing uncertainty in trade and geopolitics
Beata Javorcik, chief economist of the European Bank of Reconstruction and Development (EBRD), emphasized the persistent uncertainty affecting trade and geopolitical landscapes during the launch of the London-based lender’s latest forecasts.
Originally focused on rebuilding central and Eastern Europe post-Berlin Wall, the EBRD now extends its operations to the Balkans, Africa, and Iraq.
Javorcik noted that countries within the EBRD’s remit have shown greater resilience to volatile US trade policies than anticipated, with GDP growth forecasted at 3.6% for 2026, an increase from the 3.4% predicted in September.
“Economies across the EBRD regions are proving more adaptable in the face of persistent trade tensions than many expected.
Supply chains are evolving rather than retreating, creating new opportunities for diversification and integration into emerging industries, including those linked to AI.”
However, she cautioned that the full effects of tariffs might not yet be fully realized due to significant front-loading of imports before their imposition last year.
The EBRD’s analysis also highlighted the substantial debt burdens faced by some economies, which could increase vulnerability if global credit conditions tighten.
“Government interest payments reached 89% of government revenues in Egypt in 2025 and are estimated to account for over 30% of revenues in Kenya, and over 20% in Nigeria, Ghana, Senegal and Jordan,”
the report stated.
Japan’s Nikkei index hits record high amid software stock surge
Japan’s Nikkei share index closed at an all-time high today, propelled by gains in software-related stocks that offset recent declines.
The index surpassed the 59,000-point threshold for the first time, reaching 59,332 points intraday before settling at a record closing level of 58,753 points.
Yutaka Miura, senior technical analyst at Mizuho Securities, commented:
“Since it was widely expected that NVIDIA would post strong results, and it did, this has prompted some profit-taking for the moment.”
Ipek Ozkardeskaya, senior analyst at Swissquote, described Nvidia’s earnings as “another spectacular set of results”:
“The company posted $68.1bn in revenue, 73% higher than the same period last year, with 90% of that coming from its data-center division.
Net income almost doubled, and gross margin improved to 75% — all significantly better than analysts had expected.
Addressing concerns that Google’s TPUs — designed for AI inference, far more energy-efficient and cheaper than Nvidia’s — could steal business, Jensen Huang said that his company is ‘the king of inference today’ and that the Blackwell and next-generation Vera Rubin platforms ‘will extend that leadership further’, adding that adoption of agentic AI is skyrocketing.
Although his words may sound over-the-top, Huang has delivered consistently on his promises over the past three years.”
