The US tech stock index (NAS 100) fell almost 400 points on Thursday after Nvidia’s latest earnings release failed to inspire long-term buyers.
NAS 100 – Daily Chart
The NAS 100 has rallied to close above the 25,364 level, but the Thursday price action saw a slump to 25,026.
The activity in Nvidia was driven by early selling from institutions, while the lows were met with a big surge in retail dip buying. Nvidia stock finished the day lower by more than 5% as analysts said the move was caused by large investors.
The weakness in Nvidia was enough to outweigh a bounce in beaten down software stocks.
Nvidia’s earnings were close to expectations, but investors were obviously positioned for a larger outperformance and decided to cash out.
“The stock response suggests investors were left wanting more, which we think is tied to continued uncertainty around the growth trajectory for NVDA’s data Center business in CY27, given massively expanded capex budgets for key customers,” J.P. Morgan analysts said.
Another reason for the sell-off could have been expectations for a dividend or stock buyback program. UBS analyst Tim Arcuri asked executives on the earnings call whether Nvidia was considering returning some of the $100 billion in cash it is likely to generate this year to shareholders. “No matter how good the results have been, the stock hasn’t really gone up much,” he stressed.
Nvidia Chief Financial Officer Colette Kress replied that the company wanted to keep investing in the AI ecosystem.
“This was a good beat and raise, the usual for Nvidia, but based on the reactions preliminarily, it seems a lot was baked in to the cake so far,” said Ken Mahoney at Mahoney Asset Management.
The 25,364 level is now key for the index, and the coming days will show if the day’s sell-off gathers steam and leads to further profit-taking.
