Nvidia’s Record Results Fail to Lift Wall Street as Investors Question AI Spending Boom

BY EMMANUEL OGBONNA

Wall Street pulled lower Thursday despite broad gains across most sectors, as investors reacted coolly to another blockbuster earnings report from semiconductor heavyweight Nvidia. The chipmaker’s results once again surpassed expectations, but the stock slid sharply, dragging major indexes down with it and highlighting growing skepticism about the sustainability of the artificial intelligence spending surge.

The S&P 500 fell 1.1%, reversing part of the week’s earlier swings that had been fueled by alternating optimism and anxiety surrounding the AI-driven market rally. The Dow Jones Industrial Average declined 204 points, or 0.4%, by early afternoon trading, while the Nasdaq Composite — heavily weighted toward technology shares — dropped 1.8%.

Nvidia, now the most valuable company in the U.S. equity market by market capitalization, reported quarterly profit growth that comfortably exceeded analysts’ forecasts. The company also issued revenue guidance for the current quarter that topped Wall Street estimates, continuing a pattern of outperformance that has defined the AI boom.

Yet the magnitude of Nvidia’s prior gains appears to have reset investor expectations. Shares fell 4.6% by midday, after dropping as much as 5.6% earlier in the session, putting the stock on track for its steepest single-day decline since April.

Chief Executive Jensen Huang emphasized the strength of demand, saying customers are “racing to invest in AI compute — the factories powering the AI industrial revolution and their future growth.” His remarks underscored the company’s position at the center of a global race among technology firms and enterprises to build out data centers and advanced computing capacity.

Even so, unease is building over whether that extraordinary pace of spending can continue. Corporations and cloud providers have committed hundreds of billions of dollars toward AI infrastructure, and investors are increasingly questioning when — and if — those investments will generate sufficient productivity gains and revenue to justify the outlays.

Because Nvidia carries the largest weighting in the S&P 500, its stock movements exert an outsized influence on the broader index. Traders estimated that Nvidia alone accounted for more than half of the S&P 500’s decline Thursday. That dynamic left the index in negative territory even though a majority of its component stocks were trading higher.

Elsewhere in the technology sector, Salesforce rose 2.9% after reporting quarterly profits that exceeded expectations. The gain marked a respite for the stock, which remains down roughly 25% so far this year amid concerns that emerging AI-native competitors could disrupt its customer relationship management franchise.

Salesforce executives sought to counter that narrative by highlighting the company’s own AI integration strategy. Chief Executive Marc Benioff described “agentic AI” as a tailwind for the business and announced measures aimed at boosting shareholder returns. The company said it would authorize up to $50 billion in additional share repurchases and increase its dividend — moves typically welcomed by investors seeking signals of confidence and capital discipline.

The broader technology landscape has experienced sharp volatility in recent months as investors reassess the competitive implications of AI. Companies across industries — from trucking logistics to financial services — have seen their valuations swing on speculation that automation and generative AI tools could erode traditional business models.

Software stocks have borne the brunt of that turbulence. A widely tracked exchange-traded fund following the sector climbed 2.1% Thursday, trimming its year-to-date loss to 21.9%, but remains far below its earlier highs.

In media and entertainment, Warner Bros. Discovery edged down 0.1% after reporting a fourth-quarter loss of $252 million. Investors appeared more focused on strategic uncertainty surrounding potential acquisition bids, including interest from streaming leader Netflix and a competing proposal involving Paramount Skydance. Market participants are watching closely for clarity on which path the company’s board and shareholders might ultimately endorse.

Energy markets also saw notable volatility as geopolitical developments intersected with supply concerns. Oil prices fluctuated sharply amid renewed indirect talks between Washington and Tehran over Iran’s nuclear program. Investors are weighing the possibility that diplomatic progress could ease regional tensions and reduce the risk of disruptions to crude flows.

Benchmark U.S. crude briefly fell to $63.60 per barrel before reversing course and climbing 1.1% to $66.54. International benchmark Brent crude similarly erased earlier losses to rise 2% to $72.07 per barrel. Strategists at Macquarie described the current round of negotiations as potentially decisive, noting that the United States has deployed one of its largest concentrations of warships and aircraft to the Middle East in decades.

Overseas markets delivered mixed performances. European indexes posted modest gains following a varied session in Asia. South Korea’s Kospi surged 3.7% to another record high, propelled by strength in technology shares. The benchmark has climbed nearly 50% since the start of the year, reflecting robust investor enthusiasm for AI-linked industries.

In contrast, Hong Kong’s Hang Seng fell 1.4%, pressured by weakness in selected large-cap names.

In U.S. fixed-income markets, Treasury yields eased modestly. The yield on the 10-year Treasury note slipped to 4.02% from 4.05% late Wednesday. A government report showed that weekly applications for unemployment benefits ticked higher but remained broadly in line with economists’ expectations and historically subdued levels.

For now, equity investors appear caught between confidence in corporate earnings momentum and rising questions about valuation levels — particularly in AI-related stocks that have driven much of the market’s recent ascent. Nvidia’s latest results reinforced its dominance in advanced computing, yet Thursday’s reaction suggests that even exceptional growth may no longer be enough to satisfy a market increasingly focused on long-term returns and sustainability.