Nvidia Earnings Beat, but OpenAI and Rates Are the Variables

The analysis argues that trades in individual stocks under 10 trillion won should be avoided, and that investors should look for opportunities they can hold comfortably with a long-term view rather than chasing short-term gains.

Even though Nvidia announced strong results, there is a possibility that its stock gains will be limited. Some unease on Wall Street exists, and identifying what it is looks like the key to the direction of the market. The analysis therefore argues that the grounds for buying Nvidia need to be re-examined rather than focusing on short-term price swings.

Nvidia's stock has fallen after earnings releases in the past, but this announcement differs. The key point is that Nvidia presented annual guidance for the first time, which is read as a sign of the company's strong confidence. The forecast of 70% revenue growth for fiscal 2027 acted as a factor raising market expectations.

This revenue surprise, at a high rate in the 5% range, showed growth that exceeded market expectations.

Although this was a record, with quarterly revenue surpassing 100 billion dollars for the first time, the market's reaction was limited.

This is a growth rate of about 60%, prompting expectations of continued growth in related industries.

The analysis suggests that Nvidia's stock has not risen sharply despite record revenue growth guidance because the market doubts whether the presented consensus can actually be achieved.

Tighter regulation of data centers is also acting as a practical constraint.

Concerns about worsening profitability are growing as token prices fall amid the rise of competitors such as Claude.

US state governments are moving to tighten rules on data center expansion. Demands that operators bring their own power beyond the existing grid have made building out the power network urgent. Such rules could slow data center expansion and reduce the pace of AI infrastructure buildout.

The supply constraints Nvidia mentions are explained mainly in terms of downstream component supply, and there is little confidence in overall capex investment related to AI infrastructure buildout. This raises uncertainty about growth across the AI industry.

Despite Nvidia's strong results, the stock has not shown a strong rally. This is interpreted as the market's expectations for surging memory chip demand and supply shortages not being fully met. Some experts have voiced concern that the stock should have risen further at this point.

Domestic semiconductor stocks have failed to gain momentum despite positive news. Although SK Hynix rose 4%, the KOSPI closed in negative territory, reflecting market anxiety. This resembles past episodes when leading stocks such as LG Innotek and Samsung Electro-Mechanics lost their upward momentum, raising concerns that the semiconductor sector is losing its overall leadership. Typically, when good news arrives, the stock surges 7 to 8%, and the absence of such a move at this point is said to be telling.

Yet chips are losing steam, and failing to hold the opening price despite positive news such as share buybacks is considered an unusual development.

The probability of a hike had been expected at around 50-50, but the tightening outcome weighed on the market. Language in the monetary policy decision about inflation concerns and further hikes is seen as dampening market sentiment.

Rising interest rates are a major factor pulling down market valuations. US rates matter most, but domestic rate increases are also acting as a 'rate gravity' on the market, weighing on overall investor sentiment. This raises firms' borrowing costs and lowers the present value of future cash flows, putting pressure on stock prices.

Concerns about an unwinding of the yen carry trade are being raised as Japan raises rates, but for an unwinding to happen, the yen would first need to strengthen. However, Japan is maintaining a 'two-handed' approach of pursuing quantitative easing and rate hikes at the same time, making a yen rally hard to achieve. This suggests the yen carry trade unwind may be delayed for the time being.

The US Federal Reserve faces a policy dilemma. If it does not raise rates, it would have to consider quantitative tightening (QT), but carrying out QT when Treasury yields are already high could cause major disruption in the market. In this situation, the analysis suggests a rate hike could be an alternative for resolving liquidity problems. Debate within the Fed over the rate-hike option is expected to deepen, and this may be read as an effort to avoid a repeat of the slow inflation response of 2022. The Fed must find a balance that keeps rates high while not undermining market stability, a difficult task. It is likely reviewing a range of policy tools to hit two targets at once: shrinking liquidity and curbing inflation. These deliberations will be a key variable in determining the Fed's future monetary policy direction.