The US stock futures traded higher on Thursday, 27 August, as blockbuster second-quarter numbers from Nvidia boosted demand for chip stocks across the board. The results instilled much-needed confidence among investors and helped ease concerns surrounding the sustainability of the artificial intelligence-driven rally.
Futures tied to the tech-heavy Nasdaq rose 1%, while S&P 500 futures advanced 0.4%. Dow Jones Industrial Average futures, however, were marginally lower.
Nvidia, one of the world’s most valuable companies, saw its shares surge 7% in pre-market trading after its revenue more than doubled in the May-July quarter.
Peers also rallied sharply. Advanced Micro Devices, Arm Holdings, Qualcomm, Micron Technology, and Intel were also trading higher in the pre-market trade, with gains of up to 4%.
Sentiment was further boosted after the chip giant offered an upbeat outlook, helping ease concerns about a potential bubble in the AI economy.
Chief Executive Officer Jensen Huang said demand for the company’s artificial intelligence accelerators continues to accelerate.
Nvidia expects revenue to grow by approximately 70% in fiscal 2028, Chief Financial Officer Colette Kress said during a post-earnings conference call. Analysts had projected an increase of about 45% for that year, according to data compiled by Bloomberg.
The chipmaker’s revenue for the July fiscal quarter more than doubled to $96.2 billion, while adjusted profit came in at $2.22 per share. Revenue from the data center segment reached $89 billion, representing a 117% jump from the previous year, while edge computing revenue hit $7.2 billion, marking a 27% year-on-year increase.
US inflation, economic growth in focus
While Nvidia’s results lifted technology stocks, investors also remained focused on inflation and the outlook for US interest rates.
The inflation measure historically preferred by the Federal Reserve stood at 3.7% last month, unchanged from June. coming slightly higher than the market estimates.
The higher-than-expected reading also pushed bond yields higher and triggered a rebound in the US dollar from its recent lows. The greenback reclaimed the 99 mark in trade after falling to a three-month low last week.
In addition, the stronger growth in the US economy, which expanded at a 1.5% pace in the April-June period according to a revised estimate, also boosted expectations of a US Federal Reserve rate hike.
Treasuries slipped across the curve, with yields on rate-sensitive two-year notes climbing one basis point to 4.22%, as money markets fully priced in a rate increase by December.
Investors will now seek further clues on the Federal Reserve’s approach to inflation when Kevin Warsh delivers his first major speech as chairman of the central bank this week. The much-anticipated address at the Jackson Hole symposium on Friday offers Warsh an opportunity to address criticism that he has not been sufficiently forthright about his views on the economy.
Crude oil prices recover
Crude oil prices rebounded in trade following a three-day decline, amid hopes that supply disruptions in the Strait of Hormuz could gradually ease. Benchmark US crude recovered modestly by $0.17 to $82.46 per barrel, while Brent crude gained $0.48 to $87.40 a barrel.
Iran and Oman have reportedly reached a potential agreement on managing ship traffic through the Strait of Hormuz that would exclude military vessels from traversing the vital waterway.
Iranian Deputy Foreign Minister Kazem Gharibabadi told state television late Tuesday that commercial shipping traffic entering the Persian Gulf would pass through Iranian waters, while the outbound route would pass partly through Iranian waters and partly through Oman’s waters, the AP reported.
He said the routes would be temporary, and that Iran and Oman must discuss a permanent maritime traffic plan within 30 to 60 days. The agreement came a day after the US threatened to impose secondary sanctions on the “enablers” keeping the Islamic Republic afloat.
(With inputs from Bloomberg and AP)
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