After several weeks of turmoil, financial markets, searching for a savior, awaited NVIDIA's results with the same anticipation as the hero's last-minute rescue at the end of a Marvel blockbuster. And, in this scenario that seemed almost predetermined, Jensen Huang readily assumed the role of Captain America. Donning his iconic leather jacket, he was expected to be the one to reassure investors about the profitability of AI, dispel doubts about a potential bubble, and reverse a stock market trend that had become hesitant.
Like other Big Tech companies in recent weeks, NVIDIA's quarterly results far exceeded expectations. The figures are exceptional: the group announced revenue of $57 billion for the third quarter, up 62% year-over-year and 22% compared to the previous quarter. The Data Center segment alone generated $51.2 billion, a 66% year-over-year increase. How could it be otherwise, given the hundreds of billions of dollars invested in AI, where NVIDIA is ultimately the central player?
While this announcement was initially well-received, triggering successive rebounds in Asian, European, and then American stock markets, it's clear that even the tech "superhero" wasn't enough to reignite the flame for good. Indeed, the markets only offered a brief surge before plunging back into negative territory.
Yet, Jensen Huang spared no effort to dispel investor doubts, even going so far as to refute the idea of a potential AI bubble: "There's a lot of talk about an AI bubble. From our perspective, we see something very different." But it was all to no avail. Fundamental questions remain: the ability of Big Tech to sustainably recoup their colossal investments in AI, the sustainability of spending increasingly financed by debt, and the valuation level reached by the sector. We also note a point of interest during the earnings presentation, with Jensen Huang warning, for the first time, that growth could be hampered by the ability of hyperscalers to "obtain capital and energy" to develop their data centers.
With NVIDIA failing to act as a positive catalyst, attention is now turning to the Fed and its monetary policy meeting in early December. Market expectations continue to fluctuate in response to statements from FOMC members. The latest example: on Friday, John Williams, president of the New York Fed and considered relatively moderate, indicated that he still saw "room for a further short-term adjustment of the target range for the federal funds rate to move the policy position closer to the neutral range." In the wake of this, the probability of a rate cut, which had been hovering around 40%, soared to around 80%, allowing financial markets to end the week on a more positive note.
The final decision seems more uncertain than ever, and the Fed's last few minutes only reinforced this observation. The FOMC now appears deeply divided, and this fragmentation is all the more problematic as macroeconomic data continues to send contradictory signals (the Services PMI and the Michigan Consumer Sentiment Index were above expectations, but the unemployment rate rose in September), making it particularly difficult to interpret the economic situation. In this context, the possibility of a tie vote at the December meeting is no longer ruled out. This unprecedented scenario would raise as many procedural as symbolic questions for the Fed.