‘Nvidia Crushed Everywhere.’ Can the Party Last?

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Luke Vargas (0:18)

A bullish AI forecast from Nvidia lifts markets. We'll break down what its results mean for the larger AI trade. Plus, Fed Chairman Kevin Warsh has so far kept his views on interest rates to himself. Investors hope that's about to change.

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He doesn't think it's the Fed's job to walk them through their next move. But I think there's a lot riding on this speech in Jackson Hole because the general consensus was that this sort of tight-lipped less is more strategy did not pay off.

Luke Vargas (0:49)

And we'll get the latest from the devastating floods in Nepal and China. It's Thursday, August 27th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today.

Nvidia crushed everywhere. That was the sentiment of one tech analyst after the world's most valuable company forecast 70 percent revenue growth for 2028 and its latest earnings yesterday, far above the 45 percent growth expected. Asian chip companies powering the AI build out are broadly rising today, following Nvidia's results. Even as analysts caution that the winners and losers of the AI trade could soon be cast into stark relief, amid rising component costs and the need to demonstrate real AI revenue. Well, here to put all this into perspective, especially for the many retail investors out there, whose fortunes are linked to the AI trade, is Chris Beauchamp, Chief Market Analyst at IG Markets.

Chris, the enthusiasm around Nvidia's earnings had been equated to the World Cup final. Much of the world is, of course, tuned in in various ways. One of our reporters even went to a bar in New York City, where the earnings were being live streamed on TV. Though we should note there are hangovers after big games as well. Is that what we're seeing this morning?

Chris Beauchamp (2:07)

I think there's generally positive atmosphere. I wouldn't say we were hung over after the results, but enough to be positive on what comes next, which I think makes a change from last couple of times where it's been a bit of sense of disappointment, really. What we've picked up from these numbers last night is that, for a company that seemed to be shifting firmly out of that incredible growth phase, the incredible surge in the share price, Nvidia's greatest days, if you like, were behind it. From what we're seeing in those numbers last night in the comments, I don't know what to call it, it does look like, actually, there is still room for more growth.

It seems ridiculous to talk about it in that way, when the data center is generating $89 billion, it's still huge numbers. But the story appears to be becoming more exciting in a way that hasn't done for a while.

Luke Vargas (2:53)

Where is that greatest excitement as you see it?

Chris Beauchamp (2:56)

I think it's the fact that Jensen was highlighting in the call that this isn't just Nvidia and the hyperscalers feeding off each other and building these huge data centers. It's moving out further into industry and partnerships with other firms that shows that what was previously confined to the Mag7 is now escaped into the broader economy.

Luke Vargas (3:16)

You mentioned there may be AI and the hyperscalers not just feeding each other. I mean, this has been a concern around the sustainability of the AI buildout, circular financing in particular, surrounding Nvidia deals where the company invests in its customers to help them buy its chips. The CFO of Nvidia Collect Crests yesterday tried to head off that concern.

SPEAKER_5 (3:37)

Independent capital still underwrites every deal on its own merits. We're not making loans.

In this model, we get paid twice. Once on the hardware sale and again through the share of rental revenue. A highly reoccurring stream layered on top of a one-time equipment purchase.

Luke Vargas (3:56)

Chris, Nvidia has had answers before about circular financing concerns. Does that satisfy you? This is just highly recurring revenue streams.

Chris Beauchamp (4:05)

Depends on where you sit with Nvidia. I think it's going to be very hard to convince a lot of people that this isn't circular financing. It's a question that will reoccur again and again until, if you like, we finally reach kind of escape velocity and the investments really start to pay off. And it is almost a question of what Nvidia does with all the cash that it generates. And if it can use that to try and feed demand in the right way and in the right places, then it should help to allay at least some of the concerns that this is some giant circular game where the money just gets passed around.