Global technology stocks rallied on Thursday as buoyed investors returned to investing in AI-related stocks Nvidia Merit.
Nvidia exceeded forecasts for Revenue rose 62% year-over-year to $57.01 billion and issued stronger-than-expected fourth-quarter revenue guidance, giving investors the confidence they were looking for to continue betting on the AI
In Europe, Dutch semiconductor companies IRON And ASMI rose over 3% and 2% respectively in the first hours of trading. ASMLwhich makes critical equipment for the semiconductor industry, rose 2.1%.
Stocks listed in Asia Samsung electronics And Hon Hai precision industryalso known as Foxconn, rose 3.5% and 3.3%, respectively.
In the US, investors flocked to technology stocks in premarket trading: AMD increased by 5%, arm increased by almost 4%, Micron technology advanced 2.7%, Marvell technology 3.3% added, Broadcom recently increased by 3.1% and Intel rose by 2%.
“Phenomenal growth”
Dan Hanbury, global equity portfolio manager at Ninety One, which holds Nvidia as the second largest holding in its global strategic equity fund, cautiously welcomed the jump in Nvidia shares in premarket trading on Thursday.
“As an owner, it’s great to see an early positive reaction, but knowing that those reactions can of course reverse throughout the day,” Hanbury told CNBC’s “Squawk Box Europe.”
“Our interpretation of the numbers is that they are very compelling. Of course we can get caught up in the quarterly hustle and bustle of a company like this, but if we just put these (numbers) into context… just three years ago they were delivering $15 billion in data center revenue, now we’re looking at consensus forecasts of $280 billion for next year,” Hanbury said. “This is phenomenal growth that these guys are delivering.”
Karen McCormick, chief investment officer at London-based venture capital firm Beringea, spoke to CNBC’s “Squawk Box Europe” about some of the recent moves to increase AI and scale, particularly in the wake of Nvidia and MicrosoftIs new press wants to invest up to 15 billion US dollars in OpenAI rival Anthropic.
“It’s always a little intimidating to directly contradict Jensen Huang after he’s had phenomenal earnings results, but when you consider the almost incestuous attitude of the Valley and AI companies, it’s more than we’ve seen in the past,” McCormick said.
“I mean, if you think about it traditionally, we might have called something like this supplier financing, where your supplier helps support the business,” McCormick said. “In this case, we’re just doing it with hundreds of billions of dollars and the ecosystem itself has become so interconnected that it’s almost a little nerve-wracking because if we’re in a bubble and if any of that bubble bursts, what happens to all the companies connected to it?”
“Not nearly as bad as 1999”
The climax of circular dealmakingDebt issuances and high valuations added pressure to the market ahead of Nvidia’s highly anticipated results, even as other Big Tech companies reported solid quarterly profits.
“The flip side of this is that each of them has incredibly solid balance sheets and incredibly resilient investors that may not let them fail either way,” McCormick said.
Ben Barringer, global head of technology research and investment strategist at Quilter Cheviot, added that Nvidia’s valuation was not “particularly exaggerated.”
Valuations aren’t that high when you look at the major big tech companies, he said on CNBC’s “Europe Early Edition” Thursday.
As far as debt is concerned, that is also marginal, he said. While Meta And Amazon Although they have taken on debt, “they still have net cash positions,” Barringer added.
“I think it’s more about them sort of managing their treasury position and their balance sheet. Yes, it’s not great that they’re making some of those investments out of debt, but it’s nowhere near as bad as it was in 1999, when it was very heavily leveraged telecom companies that were making a lot of those investments.”
However, Gil Luria, head of technology research at DA Davidson, told CNBC on Thursday that Nvidia is not a bubble barometer. “The concern is that companies are taking on a lot of debt to build data centers,” he said.
“Any concerns about Nvidia have certainly been addressed (given Nvidia’s revenue), but that doesn’t mean we don’t need to keep an eye on companies taking out loans or credit to build data centers,” Luria added.
—CNBC’s Sam Meredith contributed to this report
