Markets React to Nvidia’s Strong Earnings as AI Spending Talks Heat Up

U.S. stocks showed a positive tone in the final hours of trading on Wednesday, inching higher as investors reacted to Nvidia’s robust earnings report. While the strong results provided some relief, market participants stayed cautious, questioning whether the current surge in AI spending can be sustained over the long term.

Nvidia’s Revenue and Profit Surge

Nvidia’s fourth-quarter revenue reached $68.1 billion, rising 73% year-over-year and 20% from the prior quarter. Growth was driven largely by strong demand for data center infrastructure, where revenue jumped to $62.3 billion—up 22% from Q3 and 75% from a year ago. These results show Nvidia’s central position in the expanding AI ecosystem, which has helped support equity markets recently.

The company’s net income surged to $42.96 billion, a 94% increase from the same period last year, while gross margins stayed around 75%, showing strong profitability—a trend CEO Jensen Huang links to the rapid enterprise adoption of AI agents, with customers investing heavily in the computing power needed to fuel AI growth.

This impressive performance sparked notable movements across markets, sending ripples from equities to cryptocurrencies and beyond:

• Semiconductor stocks gained ground, helping push U.S. markets higher following a choppy start to the week.
• The Nasdaq led gains with a 1.26% increase, while the S&P 500 rose 0.8%, helped by strong performance from the largest technology companies.
• Nvidia shares climbed 1.37% to $198.31 in after-hours trading, reflecting investor confidence following the earnings release.
• Major cryptocurrencies also advanced ahead of the report, with Bitcoin up 7% and Ethereum rising 12.5%.

Market Response and AI Investment Outlook

Meanwhile, Nvidia’s outlook indicated that investment in AI continues to gain momentum. Josh Gilbert, a market analyst at eToro, noted that the company’s recent results show infrastructure spending accelerating steadily, repeatedly proving skeptics wrong. This perspective echoes comments made by Huang at the World Economic Forum in Davos, where he emphasized that AI is still in its early stages and will require trillions of dollars in future investment in chips, energy, and data centers to sustain long-term growth.

Analysts have differing views on the pace of future AI investment. Goldman Sachs expects capital spending to peak in 2026 before slowing, while Cathie Wood of Ark Invest sees the current surge as the start of a multi-year investment cycle rather than a peak. Nvidia appears to align more with the latter outlook, projecting first-quarter fiscal 2027 revenue of $78.0 billion, with a margin of 2%, signaling the company is planning for continued growth beyond 2026.