Nvidia delivers but risk rally fails to take off; Yen catches a bid

AI jitters linger after Nvidia earnings beat

US stock futures have turned negative on Thursday as upbeat earnings by AI giant, Nvidia, late on Wednesday failed to sustain the two-day rebound on Wall Street. Although sentiment could yet turn around by the time US markets open, investors’ cautious response to Nvidia’s stronger-than-expected Q4 results suggests there’s still some nervousness about the earnings outlook.

Nvidia beat both its earnings per share and revenue estimates, while also projecting higher revenue for the current quarter than expected by most analysts. Its shares initially jumped by almost 4% in afterhours trading before giving up those gains, as CEO Jensen Huang’s assurances that “computing demand is growing exponentially” and that the selloff in software companies was “counterintuitive” was not enough to quell all the fears.

The needle has clearly shifted when it comes to what it’s going to take to convince investors that the billions being poured into AI infrastructure, such as data centres, will pay off. Markets are now moving into a phase where they want to see tangible results of AI monetization before pushing AI stocks above their recent ranges.

The Nasdaq 100 has not scaled a new record high since October and despite yesterday’s bullish technical breakout from a pennant pattern, it may be too soon to get excited about a meaningful rally in tech stocks.

Tariff mess clouds outlook

Crucially, doubts about the AI trade are not the only thing that are keeping Wall Street range-bound. Renewed uncertainty about tariffs has come back to haunt investors following the Supreme Court’s ruling on Trump’s reciprocal tariffs last week.

There is a lot of confusion about what the decision means for those countries exporting to the US, but the White House is insisting that the trade deals already agreed still stand. However, this is only good news for countries that settled on a 10% levy, as US trade representative Jamieson Greer yesterday confirmed that the flat 10% rate announced by President Trump in the aftermath of the tariff ruling will rise to 15% for some nations, while threatening even higher levels for others.

On the bright side, both Washington and Beijing appear to be sticking to their existing tariff deals ahead of Trump’s planned visit to China in late March or early April.

Hawkish soundbites from the Fed and BoJ

Hawkish tilts at the Fed and Bank of Japan are also probably dampening risk appetite. Recent remarks from Fed policymakers suggest that even the more dovish members, notably Waller and Miran, are happy to keep rates on hold at the next meeting, amid signs that the jobs market is recovering and the economy is not cooling.

At the Bank of Japan too the calls for rate hikes are growing even after Prime Minister Takaichi reportedly expressing her reservations to Governor Ueda about further policy tightening, as well as the appointment of two new dovish-leaning board members. Known BoJ hawk, Hajime Takata, argued for further rate increases earlier today, citing concerns about “heated” inflation.

Meanwhile, Ueda kept the door for a March or April hike wide open in an interview on Thursday, helping the yen to pare some of yesterday’s losses against the US dollar. The greenback was last trading at around 156 yen, having yesterday hit a two-and-a-half-week high of 156.82.

Against other currencies, the dollar was broadly flat ahead of the latest weekly jobless claims numbers due later today.

Gold and oil eye US-Iran talks

In commodity markets, gold and oil traders were focused on the third round of talks between US and Iranian officials in Geneva later today. Trump’s efforts to curtail Tehran’s nuclear program seems to be making progress at the diplomatic stage, but there is nevertheless elevated anxiety about possible US strikes on Iranian targets should the talks stall, amid continued military buildup of American forces in the region.  

The safe-haven gold is slightly edging up today, as it continues to test the $5,200 level.

The cautious optimism, however, is weighing on oil futures, which are trading slightly lower. Aside from signs of reluctance by Trump to order new military strikes on Iran, reports that OPEC+ is considering whether to resume its output increases in April, potentially by up to 137,000 bpd, as well as yesterday’s large build in weekly US crude inventories, are likely to keep oil’s near-term bias skewed to the downside.

Over in crypto land, Bitcoin is also lower today, with the major cryptos taking a breather following yesterday’s surge.