Nasdaq 100 Key Points
- The Nasdaq 100 is falling sharply today, despite strong earnings from NVDA, solid jobless claims, and Iran optimism.
- Traders are increasingly skeptical that NVDA's customers can turn their huge investments into chips into revenues and profits
- The Nasdaq 100 remains in the middle of its 5-month consolidation range, even with a 400+ point drop today.
Heading into today’s US session, there were reasons for optimism galore for stocks.
Signs of progress in US-Iran nuclear talks and another solid initial jobless claims figure out of the US were reassuring on the global economic front, and the largest company on the planet had just reported an earnings “trifecta.”
After yesterday’s market close, Nvidia reported another blowout quarter. The standard bearer for the AI trade posted record revenue of $68.1B last quarter, up 20% sequentially and 73% year over year, driven overwhelmingly by AI infrastructure demand. Earnings also topped expectations, with reported EPS of $1.62 vs. $1.54 anticipated ang gross margins holding at 75%. Perhaps most importantly, Nvidia guided to about $78B in revenue for the next quarter, suggesting demand remains robust for now helped along by an "agentic AI inflection point.”
Despite the “better-than-expected” report, Nvidia’s +5% afterhours gain has completely reversed, and the stock is now trading down -5% ($200B in market cap) as we go to press. The earnings reversal is reminiscent of last quarter, when the company posted strong results, only to see its +4% gain reverse to a -2% loss over the course of the following day.
As the old trading saying goes, “When a stock can’t rally on good news, the path of least resistance is probably down.” That appears to be the case for both Nvidia and the broader Nasdaq 100, where traders are no longer focused on whether Nvidia can hit its earnings numbers, but rather whether the hyperscaler capex cycle is sustainable. Essentially, the market is increasingly skeptical that NVDA's customers can turn their huge investments into chips into revenues and profits (and free cash flow) of their own, at least on any reasonable timeframe.
Nasdaq 100 Technical Analysis: NDX Daily Chart
Source: Tradingview, StoneX
While the fundamental “AI Capex Boom” theme is fading, the technicals for the Nasdaq 100 are less dire. The tech-heavy index remains in the middle of its 5-month consolidation range, even with a 400+ point drop today.
While the 50- and 100-day moving averages have flattened out, the long-term 200-day MA is still trending higher, catching up with price and providing potential support in the lower-24,000s. As long as that support area holds, traders are unlikely to panic, but if it gives way in the coming days, we could see a quick drop to the 23,000 area or lower.
-- Written by Matt Weller, Global Head of Research
Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX
