‘Nvidia Crushed Everywhere.’ Can the Party Last?

A bullish AI forecast from Nvidia lifts markets. We'll break down what its results mean for the larger AI trade. Plus, Fed Chairman Kevin Warsh has so far kept his views on interest rates to himself. Investors hope that's about to change. He doesn't think it's the Fed's job to walk them through their next move. But I think there's a lot writing on this speech in Jackson Hole because the general consensus was that this sort of tight lift less is more strategy to not pay off. And we'll get the latest from the devastating floods in Nepal and China. It's Thursday, August 27th, I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. Nvidia crushed everywhere. That was the sentiment of one tech analyst after the world's most valuable company forecast at 70% revenue growth for 2028, and its latest earnings yesterday, far above the 45% growth expected. Asian chip companies powering the AI build out are probably rising today following Nvidia's results, even as analysts caution that the winners and losers of the AI trade could soon be cast into stark relief amid rising component costs and the need to demonstrate real AI revenue. We'll hear to put all this in a perspective, especially for the many retail investors out there whose fortunes are linked to the AI trade is Chris Beechham, chief market analyst at IG markets. Chris the enthusiasm around Nvidia's earnings had been equated to the World Cup final. Much of the world is of course tuned in in various ways. One of our reporters even went to a bar in New York City where the earnings were being live streamed on TV, though we should note there are hangovers after big games as well. Is that what we're seeing this morning? I think there's a generally positive atmosphere, I wouldn't say we've hung over after results, but enough to be positive on what comes next, which I think makes a change from last couple of times where it's kind of been a bit of a sense of disappointment, really. What we've picked up from these numbers last night is that for a company that seemed to be shifting firmly out of that incredible growth phase, the credible surge in the share price. Sort of Nvidia's greatest days, if you like, were behind it, from what we're seeing in those numbers last night in the comments, and then it's called it does look like actually. There is still room for more growth and this seems ridiculous to talk about it in that way when the numbers are yet the data central did generating $89 billion. It's still huge numbers, but the story appears to be becoming more exciting the way it hasn't done for a while. Where is that greatest excitement as you see it? I think it's the fact that Gentson was highlighting in the call that this isn't just Nvidia and hyperscalers feeding off each other and building these huge data centers. It's moving out further into industry and partnerships with other firms that shows that what was previously confined to the MAX7 is now escaped into the broader economy. You mentioned there may be AI and the hyperscalers not just feeding each other. This has been a concern around the sustainability of the AI build out, circular financing, in particular, surrounding Nvidia deals where the company invests in its customers to help them buy its chips. The CFO of Nvidia collects yesterday tried to head off that concern. Independent capital still underwrites every deal on its own merits. We're not making loans. In this model, we get paid twice once on the hardware sale and again through the share of rental revenue, a highly reoccurring stream layered on top of a one-time equipment purchase. Nvidia has had answers before about circular financing concerns, does that satisfy you? This is just highly reoccurring revenue streams. Depends on where you sit within Nvidia, I think it's going to be very hard to convince a lot of people that this isn't circular financing. It's a question that will recur again and again until, if you like, we finally reach kind of escape velocity and the investments really start to pay off. It is almost a question of what Nvidia does with all the cash that it generates and if it can use that to try and feed demand in the right way and in the right places, then it should help to a lay at least some of the concerns that this is some dying circular game where the money just gets passed around. One of the real areas of concern right is it's like not that its biggest customers don't have the capital to finance purchases of Nvidia chips. It's the smaller ones, like how wide is that market if Nvidia takes itself out of the financing equation? Yeah, it is the query that it just has to become self-sustaining for the moment. It looks like everything is moving in the right direction, that even the debt-to-rectly ratio is very strong and shows that it can sustain at least some mistakes, if you like, in this area. Let's look at how AI demand is being felt across software and hardware, starting with Salesforce and the software side at the beginning of the year. Wall Street was kind of falling out of love with software. Would clients be shifting their spending away from enterprise software and just putting it towards AI? Well, we got results from Salesforce yesterday, the company posting double digit revenue gains. It said that demand for its AI and for its data products was increasing, and it's going to team up with Anthropic and offer this Claude Force product as it's calling it. All of this had chief executive Mark Benning off in a pretty good mood to say the least and kind of dunking on the haters who saw SaaS or software as a service earlier this year as being dead. As everyone can see, we just had one of the best quarters ever, and we outperformed on all of our key metrics. And as I just went through and all these key metrics and these key areas, this nonsense of this SaaS apocalypse, I think it's time for it to stop. Chris, is Mark Benning off right about that? I think so. And Mark, it's due this from time to time. They go from ramp and optimism to irrepressible fear if you like around the software firms. It went too far. The key was that the software firms like Salesforce had to show that they were not just being obliterated by AI, but taking it, making it their own. And I think if you look at the numbers, the agent force AI and lies revenue is up more than 200% over the year. And so it's taking AI and using it and making it to improve their own performance. And yes, it requires job changes and losses, and there's a painful. But I think for the moment these businesses look to be weathering the storm quite well. And looking leaner and meaner as a result of AI. Exactly. And please investors and certainly it seems to be delivering the kind of improvements and the improvements in the income that will people want to see. Chris Beecham is the chief market analyst at IG markets. Chris, thanks so much for being with us on what's news. Thank you for having me. Next on the mind of investors, Fed Chairman Kevin Worsh's take on the US inflation outlook. Central bankers gather in Jackson Hole plus the rest of the day's news after the break. We are exclusively reporting that a surprise visit to Moscow by CIA director John Rackliffe this week was to deliver a message to Russia not to attack NATO countries. The trip is Rackliffe's first publicly known visit to the Russian capital and follows US intelligence assessments that President Vladimir Putin could test NATO with a limited assault on an allied country in the next few years. The journals Dan Michaels says that while Rackliffe didn't meet with Putin himself, a Kremlin spokesman confirmed that he was briefed on the talks. The message comes as Russia has been increasing a number of small scale attacks in Europe sometimes called hybrid or grey zone attacks because they're not quite at the level of outright combat by it. For example, in recent weeks, a explosive drone was found under a Ukrainian cargo plane at a German airport and several others were found also. So it seems that Washington is getting a little nervous that Russia may think that it can attack NATO countries in Europe without the US reacting. And all indications are that Rackliffe was there to say don't do that. We take Europe seriously and don't think that you can go and bite off a piece of, for example, one of the Baltic countries that border Russia and Russia had occupied as part of the Soviet Union. A spokeswoman for the CIA declined to comment while President Trump has described the trip as "semiroutine." More than 1,400 people remain missing in Nepal and China following tsunami-like floods there yesterday that were likely triggered by the collapse of a glacier in the Himalayas. Our Southeast Asia Bureau chief, Trippi Lahiri, has the latest. It's going to take a long time for rescuers to either find some of these missing or decide that they need to declare them as dead, even though bodies won't be found. There is a body that's been recovered 150 miles away from where all of this is happening. This was a busy area. The flood went through this place called Girongport, which is the main land crossing hub between Nepal and China. It's become very busy. Electric cars go through there, tourists go through there in both ways because there are these sites that Hindus and Buddhists tend to go through around this time of year, which is why you'll see that among the missing very large numbers of foreign tourists. And then, of course, there's been development, so there are hydro-powered projects, there are just more settlements, more commerce, highways have been built, and all of that, obviously, has brought more people to the area. And the Fed's annual conference in Jackson Hole, Wyoming kicks off today with all lies on Chairman Kevin Warsh, who's due to speak tomorrow. As part of a new policy of communicating less, Warsh has been tight-lipped about his thoughts on the economy, despite high inflation and recent wild trading in bond markets. But his former Fed Governor, Frederick Michigan, told the WSJ's Take On The Week podcast, "Warsh may just have to speak up to keep investors on-side. The issue right now is that for a pretty substantial period of time markets are going to be very skeptic about Kevin. We're already seeing a mini-inflation scare with these long bound rates go up. This is because people are not sure about Kevin Worsh, just that they were not sure about Alan Greenspan when he first became chair. And of course Alan Greenspan was extremely successful in getting inflation down and convincing the markets that he was serious about controlling inflation. And this is one of the reason why I think transparency is extremely important because I want the markets to say, you know, it doesn't matter who's the chair of the Fed. The Fed will do a reasonable job. For more on Jackson Hole and what to expect from the new Fed Chairman, check out the link we've left in our show notes. And that's it for what's news for this Thursday morning. Today's show was produced by Hattie Moyer and Daniel Bach, our supervising producer, his Sandra Killhoff, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show and until then, thanks for listening. [MUSIC]