Nvidia’s eye-popping results and strong beat remained short of triggering the kind of euphoria they would have a year ago. Nvidia printed a sizeable beat on almost every metric it released. Alas, the stock price — which had been set to challenge the $200 per share level in afterhours trading — took an unexpected U-turn. Nvidia dived more than 5% instead, closing the session below the $185 per share mark.
Michael Burry pointed to the company’s $95bn purchase obligations — up from $16bn a year ago — suggesting that if AI demand slows or customers pause orders, Nvidia could be stuck paying for unused capacity, compressing margins and resetting earnings expectations lower. A year ago, the same commitment would have been considered bullish — Nvidia locking in supply early to meet multi-year demand from big customers like Microsoft, Amazon and Google. Today, the interpretation has flipped on fears that AI capex could slow and leave Nvidia with excess capacity. This looks like peak-cycle behaviour. It doesn’t necessarily mean that AI adoption will slow, but that the Big Tech AI push could level out.
So here we are. Nvidia tanks despite blockbuster results and strong guidance — there was little the company could have done differently to change the immediate market reaction.
Salesforce, on the other hand, which was sent lower in afterhours trading, ended 4% higher. Its Agentforce AI generated $800m last quarter, up from $500m. CrowdStrike jumped nearly 5% despite softer-than-expected guidance, while Snowflake rebounded more than 2% on robust AI-related bookings that boosted earnings. The London Stock Exchange Group, which has lost more than 40% since February in the broader software selloff, also beat projections last quarter and guided to a better 2026. The company owns proprietary data that AI cannot easily replicate; on the contrary, AI models are likely to pay for access to that data.
In conclusion, investors are cautiously returning to software names as earnings show AI demand boosting rather than destroying business models. Concerns about AI disruption are not over — Block, for example, announced plans to replace up to 40% of certain roles with automation over time. But if machines replace people, software companies that build the new workforce could ultimately benefit.
We remain in a period of great uncertainty regarding the winners and losers of AI adoption. We don’t know how fast the shift will happen, but volatility is likely to persist due to low visibility.
For now, it feels like valuations in AI enablers — think Nvidia, Meta and Google — may have peaked, while the software selloff appears overdone. Meanwhile, memory chip makers have been among the clearest winners since the last quarter of last year, and higher memory prices could eventually pressure margins at PC and smartphone manufacturers.
Zooming out, Nvidia’s drop pulled the S&P 500 into the red yesterday — but most stocks rose, helped by lower US yields.
The US dollar was better bid but remains capped below its 50-DMA. Gold consolidates gains near the $5’200 per ounce level.
Crude oil wobbles on US-Iran headlines. US crude briefly slipped below $64 per barrel on reports of “significant progress” in negotiations between Washington and Tehran, but rebounded as talks were paused and pushed to a later date — keeping geopolitical risk alive, including the possibility of disruption to oil flows through the Strait of Hormuz. Intraday oil trading remains challenging due to high volatility. But the medium-term outlook is broadly unchanged: crude could give back part of its recent gains once tensions ease. But until then, a direct military escalation involving Iran could push US crude into the $70–80 per barrel range, depending on intensity.
We are coming toward the end of another eventful week. The biggest news was Nvidia earnings, which notably failed to improve appetite for US tech stocks.
Looking further back, the rotation trade strengthened in February: capital flowed out of US technology into US non-tech and global indices, and the MSCI World ex-US widened its outperformance gap throughout the month. Investors largely shrugged off trade tensions with the US. European inflation eased, and Federal Reserve (Fed) rate-cut expectations moderated following stronger-than-expected employment and inflation figures — even though US GDP growth slowed sharply in Q4, reflecting slower consumer spending growth, a negative contribution from government spending due to a federal shutdown, and weaker net exports.
Looking ahead, uncertainty surrounding AI and its social and economic impact will continue to shape markets — sometimes unpredictably. This environment could favour a flight toward “high assets, low obsolescence” — companies with tangible assets or durable competitive moats that face limited disruption risk – the HALO trade that everyone is talking about.
I like the FTSE 100, as its energy and mining exposure fits well with the rotation theme, although elevated valuations in parts of the mining sector could become problematic down the line.
In FX, the US dollar may remain under pressure in the coming weeks, though major peers are approaching key technical levels. The EURUSD, for example, has struggled above the 1.20 mark amid concerns that excessive euro strength could hurt European economies already challenged by US tariffs. The cable outlook remains cautious given policy divergence expectations between the Fed and the Bank of England (BoE), with the latter seen cutting rates twice before summer. Selling pressure on the Japanese yen has eased alongside Japanese yields, which in turn has helped limit upward pressure on global sovereign yields — possibly also influenced by rising stress in private credit markets. But the downside risks in the yen remain on Takaichi’s apprehension regarding rate normalization.
Somehow worryingly, private credit concerns emerged this month linked to the software selloff, but new stress emerged yesterday involving Barclays and Atlas SP (Apollo’s structured-credit arm). The lenders reportedly helped arrange $2.7bn of loans to a UK mortgage company accused of financial irregularities.
In recent years, this type of stress has often been brushed aside, but JPMorgan’s Dimon has repeatedly warned of ‘coach roaches’ that parts of the market may be taking excessive risks to boost returns.
How excessive — time will tell.
