NEW YORK, Feb 26 : An index of global equity markets eased after hitting a fresh record high on Thursday as concerns about lofty valuations of leading technology companies weighed on markets after artificial intelligence chipmaker Nvidia reported strong quarterly results.
Shares on Wall Street and in Europe traded down as investors digested another blowout quarter from Nvidia, the world’s most valuable company, but worried about its market value even as it forecast that first-quarter revenue would be a whopping $78 billion.
On Wall Street, technology and communication services were the biggest losers, with Nvidia’s shares down 4.4 per cent. The Dow Jones Industrial Average fell 0.41 per cent, the S&P 500 lost 1 per cent, and the Nasdaq Composite fell 1.7 per cent.
LOFTY VALUATIONS RAISE CONCERNS
“People are getting concerned about lofty valuations even though when you look at a company like Nvidia, the estimates, cash flow, and everything else are dramatically higher,” said Thomas Plumb, chief executive and portfolio manager at Plumb Funds in Madison, Wisconsin.
“But I think the sentiment will eventually match up with the realities,” said Plumb, who has Nvidia as his largest investment holding.
In Europe, the broad STOXX 600 index edged lower by 0.05 per cent after touching a new record high. MSCI’s All Country World Index was down 0.62 per cent after rising to a record high of 1,063.86.
“It’s an increasingly cloudy future for AI,” said James St. Aubin, chief investment officer at Ocean Park Asset Management in Santa Monica, California. “It’s not that AI isn’t going to work out. It’s about who’s going to be the winners? How do these firms keep competitive advantages? There’s a lot of upstream and downstream impact that the market is really having trouble sorting out.”
Several heavyweight technology companies traded lower on Wall Street. Alphabet was down 2.5 per cent, Apple fell 1 per cent, Amazon lost 2 per cent, Oracle shed 0.3 per cent and Tesla traded lower by 3 per cent.
“I always go back to the curse of high expectations, where with Nvidia, everything has to be perfect in order for it continue to thrive and to appreciate. And I think right now they maybe didn’t reassure investors enough that the line of sight was clear,” St. Aubin said.
Salesforce, which reported quarterly revenue higher than analyst estimates after markets closed on Wednesday, was up 2.2 per cent.
London Stock Exchange Group’s shares jumped 9 per cent in London after it announced a $4.1 billion buyback under pressure from activist investor Elliott Management, which recently built a stake in the data provider.
NUCLEAR TALKS
Investors are eyeing indirect talks between the United States and Iran over their long-running nuclear dispute. Oil prices rose in a volatile session as markets awaited the outcome of the talks.
Brent crude futures were up 2 per cent, at $72.27 a barrel. U.S. crude futures rose 1.7 per cent to $66.53.
Treasury bond prices in the U.S. and Europe edged higher on the back of safe-haven bids as investors grew nervous about tensions involving Iran.
The yield on benchmark U.S. 10-year notes fell 2.3 basis points to 4.025 per cent. The 2-year note yield fell 1.8 basis points to 3.453 per cent.
In Europe, the yield on the benchmark German 10-year Bunds lost 0.4 basis point to 2.694 per cent.
Safe-haven gold rose, with spot gold adding 0.17 per cent to $5,179.23 an ounce.
In currency markets, the dollar rose against major currencies, including the euro and Swiss franc.
The euro was down 0.25 per cent at $1.178 against the dollar. The dollar was up 0.27 per cent to 0.774 against the Swiss franc.
The Japanese yen was flat at 156.375 against the greenback days after the government of Prime Minister Sanae Takaichi nominated two pro-stimulus academics to the board of the Bank of Japan.
