Market Wrap-Up: Nvidia Share Price Falls Even Amid Revenue Doubling, Gold Finishes the Day Down 1%

The much-anticipated Nvidia earnings announcement came out overly positive, though the share market reacted extremely indecisively, a trend we're seeing permeate throughout the rest of the global economy.

Nvidia's revenue for the three months ending July 31 swelled to US$30 billion: a rise of 122% year-over-year and better than expected by analysts, who forecasted revenue of US$28.7 billion. Amid a wary market climate, the company also announced a further US$50 billion approval for share buybacks, which indicated its strong confidence internally.

The share market was indecisive, to say the least, with traders selling as much as 8 per cent in after-market hours only to report strong earnings, then rebounding. In saying that, it was expected there would be some increased volatility, with the options market pricing a likely swing of up to 10% in either direction on the earnings announcement.

The last quarter results of big tech companies Google, Microsoft, Meta, and Amazon, some of Nvidia's main users, point towards huge amounts of money going into AI infrastructure. Nvidia earnings guidance, which was closely followed for clues about how the AI boom is succeeding, pointed toward growth in the trend of generative AI per Chief Executive Officer Jensen Huang.

The importance of Nvidia’s earnings results to the broader economic environment cannot be overstated. The company represents 6% of the total value of the S&P 500 and is currently the third most valuable company in the world with a market cap of US$3.1 trillion.

While the index has gained 27% over the past 12 months, Nvidia is up 167% over the same period. But because big tech is driving U.S. stocks to new record highs, and because spending on Nvidia is seen as a signal of future tech earnings, Nvidia’s results are a key barometer of the future of the U.S. stock market, as well as macroeconomic health more broadly.

"There are a lot of moving parts today, and items like Nvidia results are hanging over the market for direction clues on (interest) rates," one gold trader said. "The Fed is rightly cautious right now and that's not helping people with direction. Cash is king today."

Meanwhile, Wednesday saw gold prices drop by 1% as it struggled to settle amid the dollar strength and uncertainty ahead of a key U.S. inflation report that would provide clues on the Federal Reserve September meeting policy.

Notwithstanding this dip, gold has increased by 21 per cent so far this year in the face of an expected cut in U.S. rates, international instability, and growing purchases of gold by central banks.

Furthermore, after years of outflows, gold exchange-traded funds (ETFs) are starting to see inflows again, with August marking the fourth consecutive month of gains.

In conclusion, despite Nvidia's impressive earnings and its pivotal role in the tech-driven rally of U.S. stocks, the market's reaction highlights the prevailing uncertainty and volatility around all asset classes, precious metals included.

Investors are grappling with mixed signals from economic indicators, interest rate concerns, and the broader implications of the AI boom. As Nvidia continues to serve as a bellwether for tech and economic health, its future performance should continue to be closely monitored.