Please see the below article from Brooks Macdonald detailing their thoughts on the Nvidia earnings results and their current market input received this afternoon, 28/08/2025:
What has happened?
While the S&P 500 hit a new record in USD terms yesterday, ongoing concerns about the Fed’s independence and France’s fiscal outlook tempered the optimism. These worries led to a steeper US yield curve and pushed the Franco-German bond spread to a seven-month high. After the US close, Nvidia’s earnings received a lacklustre response from investors.
Nvidia growth outlook uncertain
Nvidia reported Q2 results that slightly beat expectations, with revenue of $46.7bn and guidance for the next quarter broadly in line with expectations. While sales were still up over 50% year-on-year, this marks a clear slowdown from the triple-digit growth seen in previous quarterly announcements. Revenue from the key data centre segment came in just below forecasts, and uncertainty remains around sales to China. Although the US has resumed export licenses for these chips, Nvidia noted that the revenue-sharing plan tied to those exports has not yet been formalised and this uncertainty disappointed investors. Looking forward, Nvidia’s expectations for $54.0bn (+/-2%) in sales for Q3 vs previous expectations of $53.8bn did not constitute the strong ‘beat and raise’ that some investors had hoped for and the shares fell approximately -3% post the close.
Trump maintains pressure on the Fed
Concerns about the Federal Reserve’s independence continued to influence markets, with investors pricing in faster rate cuts and higher inflation expectations. This led to a steepening of the yield curve, as 2yr yields continued to fall after the news earlier this week that President Trump was seeking to fire Fed Governor Lisa Cook.
French political uncertainty continues
French bonds remained under pressure ahead of the 8th September confidence vote, as investors questioned the government’s ability to manage the deficit. Prime Minister Bayrou offered to negotiate with opposition parties, but the risk of the government falling—and potentially triggering new elections—remains high. This uncertainty pushed long-end yields higher, with the 30-year reaching its highest level since 2011 and the Franco-German 10-year bond spread nearing last year’s peak.
What does Brooks Macdonald think?
The reaction to Nvidia’s results last night, together with the MIT report released last week which found that 95% of organisations are currently getting zero return on their investments in Generative AI, reinforces our view that some AI related stocks appear fully priced. Given the resulting equity market concentration, adequate diversification by sector and region remains more important than ever.
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Andrew Lloyd
28/08/2025