US stocks extended their lower momentum to close in the red on Wednesday, with key indices easing further from their recent peaks as markets digested hawkish signals from the Fed’s last meeting.
The S&P 500 and the Nasdaq retreated 0.3% and 0.2%, respectively, from their record highs yesterday, while the Dow lost 0.5%.
Losses were broad-based among major rate-sensitive sectors, with Tesla dropping 3.5% and Alphabet down 0.9%.
Nvidia shares traded 0.5% lower ahead of their highly anticipated earnings report after the closing bell, as its guidance will serve as a key sentiment check for the global AI rally this year.
On the earnings front, Target plummeted 8% after missing its earnings report, while PDD ADRs hovered in the green on robust results.
We heard from the most important company in the world on the state of the new industrial revolution.
It continues to unfold, and at a very, very fast pace. And yet, it's still very early.
For Q1, Nvidia reported another multi-billion dollar growth quarter, on expanding margins, and with the outlook for another multi-billion dollar growth quarter - with demand outstripping supply for the foreseeable future. Take a look at the hyper-growth (both relative and absolute) in this financial summary from Nvidia …
Keep in mind, this is the first year-over-year comparison since Jensen Huang shocked the world a year ago by declaring "the beginning of a major technology revolution."
In that earnings call a year ago he told us that a trillion-dollar "retooling" of the world's data centers was underway. For perspective, Nvidia has over 80% market share, and has done only $65 billion in data center revenue thus far (since the roll out of ChatGPT in November of 2023). It's still early.
So, after putting up quarter after quarter of triple digit growth, Jensen says they now are "poised for the next wave of growth." Nvidia's new Blackwell chip is powering the newest iteration of ChatGPT (version "4o") - launched just nine days ago.
We talked about this back in February. The CEO of OpenAi (developer of ChatGPT), Sam Altman, had said the next iteration of ChatGPT "will change the world." With that, let's revisit what he said about it.
He said it's a tool for productivity - it will magnify what we can do (a personal AI "assistant"). Costs will go down, capabilities will go up. It will be more reliable than earlier versions, have better reasoning abilities, and be customisable to everyone's individual styles, and we will run it on our own data.
He said it will be "multimodal” - the model will understand and interact with not just text, but images, audio and video.
This opens up an entirely different level of human-computer interaction;
Robots will understand human commands, voice and gestures, facial expressions, tones of voice, etc.
Autonomous vehicles will have a better understanding of their environment. In-car assistants will truly be an in-car assistant (engaging in natural language, interactive, responsive to verbal and visual cues) - your car will know your behaviours and preferences.
Education will be more engaging and interactive, and tailored to the styles of needs of every student. As Satya Nadella (CEO of Microsoft) said, every person in the world will have their own personally tailored AI tutor.
And considering all of that, the real difference maker in this next version of models, is the "learning" feature of generative AI. In the above examples, the models will need less and less human command over time. They learn from previous commands, interactions, feedback and they adapt and optimise their behaviours - they become more and more accurate in their predictions/output.
This technology will revolutionise product development, improve disease diagnosis and solve complex problems - and do it all much faster than has been done in the past. Again, this transformational technology is now here.
What else was revealed? There's another (more advanced) chip coming behind the Blackwell chip (the chip that delivered all of these capabilities we just discussed). Moreover, Jensen said they are in a "1 year rhythm" in chip development. This implies AI's growth (model size, computational power and applications) is on a more accelerated path than the typical two year cycle observed in Moore's Law.
As we've discussed over the past year, this is a new industrial revolution and we should expect it to grow the economic and stock market pie.
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