(Bloomberg) — Investors hoping that Nvidia Corp.’s earnings would rejuvenate the artificial intelligence trade didn’t exactly get the report they wanted.
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The chipmaker failed to generate much excitement, with a beat that fell short of the company’s typical blowout numbers and a mixed outlook for next quarter. While Nvidia allayed some of the fears that have weighed on the stock since the emergence of AI startup DeepSeek earlier this year, big questions about the longevity of spending on AI remain. The stock rose about 1% in premarket trading.
“A couple months ago we were very certain of the growth component of AI,” said Brian Mulberry, client portfolio manager at Zacks Investment Management Inc. “Where we are today, that seems to be a much wider range of outcomes than what it was before. And the volatility in these AI-related names are starting to reflect that.”
Things are even murkier on the AI services side. Salesforce Inc., which began rolling out so-called AI agents last year, dropped more than 3% in premarket trading after giving a disappointing forecast. “Agentforce,” which is meant to complete tasks such as customer service without needing direction from a person, is only expected to make a modest contribution to revenue this year, the company said.
“Salesforce seems to be struggling a bit,” said Chris Brigati, chief investment officer at SWBC. The reports from Nvidia and Salesforce “suggest the AI trade won’t be anywhere near as robust as it was in 2023 or 2024, though it remains positive, with some room to grow. It’s like we’re dropping from fifth gear to fourth.”
Brigati is still bullish on Nvidia as the market leader in AI, and said any pullback in the shares could be a good buying opportunity.
The earnings reports came at a delicate time for the AI trade. China-based DeepSeek, a lower-cost AI model, raised questions about American dominance of the burgeoning field, as well as about the huge amounts that companies are spending on the technology. At the same time, the technology sector has been hit by uncertainty about the impact that President Donald Trump’s tariffs will have on the US economy and inflation.
A Bloomberg index that tracks the Magnificent Seven — which includes Nvidia — has fallen 11% from a December peak. The tech-heavy Nasdaq 100 Stock Index is down nearly 5% from a record close last week.
