Please see below, an article from Brooks Macdonald providing a brief analysis of the key factors currently affecting global investment markets. Received today – 27/02/2025
What has happened?
Markets were positive for the most part yesterday ahead of US technology megacap Nvidia’s results out after the US close, while tariff remarks from US President Trump late in the day weighed on sentiment. The US S&P500 equity index finished largely flat, while the pan-European STOXX600 and the UK FTSE100 equity indices which had closed earlier did better but were both up by less than +1%, all in local currency price return terms. When Nvidia results did arrive, the tech giant delivered good-but-not-great quarterly results, in turn drawing a muted response from investors which have hitherto grown accustomed to blowout numbers.
Nvidia results
The main focus for global investors yesterday was Nvidia’s results which landed after the US stock market close. In the event, the world’s second biggest company by market value (at around US$ 3.2 trillion) and the poster child for the Artificial Intelligence(AI) spending boom, delivered good-but-not-great quarterly results. The company said revenues would be around US$43 billion over the current fiscal quarter (February-April), just ahead of a market consensus estimate of US42.3 billion, but below the upper end of the range at around $48 billion. Nvidia’s CEO Jensen Huang said that the company would “grow strongly in 2025”, while the demand for its latest ‘Blackwell’ AI chip was “amazing” and the “fastest product ramp in our company’s history”.
Trump’s trade tariff comments knock EU sentiment
Shortly after European stock markets had packed-up for the day, US President Trump threw another tariff-sized spanner in the works for European Union (EU) trade. Trump announced that he was proposing a potential 25% tariff against the EU on “cars and all other things” and coming “very soon”. Given Trump’s comment yesterday that “the European Union was formed in order to screw the United States”, it suggests these tariffs could be widespread across sectors. Furthermore, asked if the EU might retaliate, Trump said “they can’t I mean they can try, but they can’t.” The pan-European STOXX600 equity index opened down -0.7% earlier this morning.
What does Brooks Macdonald think?
Nvidia’s results and share price reaction are a reminder that expectations matter. No one doubts that Nvidia is a great success story and has some amazing products at the heart of the AI boom. The question is: what is the right value to ascribe to Nvidia? With even just the smallest change to Nvidia’s gross margins (currently up in the 70’s%) for example, this can make huge differences to long-term modelling outputs and its share price. What should investors do? At the end of the day, Nvidia is a widely-researched company so outsmarting the market is very difficult – arguably the easiest solution from a portfolio perspective therefore is to be diversified, keeping some but not too much exposure to any one stock to avoid concentration risk, and especially so when it comes to gigantic-sized stocks like Nvidia.
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Alex Kitteringham
27th February 2025